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Private sector activity in the euro area accelerated in July beyond expectations preliminary to reach the fastest pace of expansion since June of 2018, as reflected in the composite index of managers of shopping (PMI), which is stood at 54,9 points from the is 48.5 the previous month , with a clear difference in the intensity of the rebound among the major central economies, France and Germany, and the peripheral, Italy and Spain.
In particular, the PMI index of service sector activity in the euro zone rose in July to the to 54.7 points from to 48.3 from the previous month, its largest expansion in nearly two years, while the manufacturing PMI rose in July to 51.8 points from 47,4 in the previous month, which represents the first expansion of the sector in the eurozone in a year and a half.
“An increase in manufacturing production, in addition to new expansion of the services sector is a good omen for the recovery of the economy in the third quarter, following the unprecedented drop observed in the second quarter,” said Chris Williamson, chief economist of IHS Markit.
however, the expert warned that, in the absence of a vaccine or effective treatment, social distancing measures should continue to apply, “which reduces the ability of many businesses to operate at a capacity similar to the pre-pandemic and represents a major limitation for the prospects of long-term economic recovery”.
In this sense, the data of the composite PMI for the month of July show a greater strength in the recovery in activity in economies such as France and Germany, with increases in the index up to 57,3 points in the case of the country and of 55.3 in the of the germans, which represents maximum of the last 29 and 23 months, respectively.
at his side, the expansion of private sector activity in Italy and Spain seem much more moderate in July, when their respective index PMI composite reached 52,5 and 52,8 points, which represent the best readings of the data in the last 15 months in the case of Spain and 24 months in the Italy.
Also, despite the observed increases in total activity and new orders, companies in the euro zone continue to operate with a considerable excess of capacity, which allowed to reduce for the seventeenth consecutive month the pending orders to completion, but it took companies to new settings of your templates, destroying jobs for the fifth consecutive month.
In this sense, the data by countries showed that the falls much more pronounced in employment in July can be observed in Italy, followed by Spain and finally Germany.
“The numbers of infected will mainly determine if the economic recovery can be sustained, and the recent signs of new outbreaks represent a risk, especially for many areas of the services sector, such as travel, tourism and hospitality sector,” warned Williamson.
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