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Business activity across the eurozone rose for the first time since February, according to provisional Purchasing Managers’ Index (PMI) survey data, growing at the sharpest rate for just over two years as economies continued to reopen after lockdowns implemented to prevent the spread of the coronavirus disease. 

The flash IHS Markit Eurozone Composite PMI rose further in July from the all-time low of 13.6 seen back in April, climbing from 48.5 in June to 54.8. This was the first reading above the 50.0 no-change level since February and indicated the largest monthly gain in output since June 2018. 

The Purchasing Managers’ Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors. It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting. The purpose of the PMI is to provide information about current and future business conditions to company decision-makers, analysts, and investors.

Both manufacturing and services have revived

According to the survey, both manufacturing and services returned to growth (the latter recording the slightly stronger performance), with growth hitting 23- and 25-month highs respectively. While the rise in service sector output was the first since February, the increase in factory production was the first reported since January 2019.

Demand was also reported to have revived alongside the lifting of lockdowns, with new order inflows likewise rising for the first time since February and increasing to an extent not seen since October 2018.

However, the upturn in new orders was less marked than that recorded for output, thanks in part to a further loss of export sales, leading to an ongoing depletion of backlogs of work during the month, adds the survey.

Employment still fall

Job losses remained especially severe in the manufacturing sector where, besides the prior three months, the rate of job cutting was quicker than at any time since 2009. A far more modest rate of employment decline was seen in the service sector, though even here the drop in headcounts was the greatest for seven years, barring the height of the pandemic. 

France led the upturn

By country, French companies led the upturn, reporting a second successive month of output gains, with growth surging to the fastest since January 2018. Both manufacturing and services reported the best output growth for two-and-a-half years. While French service sector companies reported the first rise in new orders since February, factory orders edged back into decline, led by a sharp drop in exports.

Employment continued to fall, but the loss of jobs was the smallest seen over the past five months.

In Germany, output rose for the first time since February, increasing to an extent not seen for almost two years. A surge in service sector activity (which showed the largest gain for two-and-a-half years) was accompanied by a more modest manufacturing output increase. The factory output gain was nonetheless the best seen for nearly two years, fueled by a marked jump in new orders, including exports. Employment continued to fall, however, with overall job losses centred on the manufacturing sector.

The rest of the region outside of France and Germany also saw output return to growth, led by manufacturing, though the overall gain was more modest than seen in France and Germany. While new orders stabilised and job cutting moderated, the pace of job shedding remained marked, especially in services. 

Photo: Pixabay

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