Eurozone business activity during July managed to return to growth after some of the measures imposed to control the spread of COVID-19 were eased, yet the rebound from the eurozone’s services sector was not as large as was expected, according to a survey.
Several governments around Europe started easing lockdown measures as the number of active cases went down, prompting businesses to reopen and to start operating under the ‘new normal’.
The eurozone managed to contract by a record 12.1% during the last quarter, according to data on Friday, and a poll issued by Reuters predicted that there will be a growth of 8.1% during this quarter, with businesses slowly reopening.
IHS Markit’s final Composite Purchasing Managers’ Index (PMI) on Wednesday, the eurozone’s index grew to 54.9 in July from June’s 48.5, which was higher than the forecasted 54.8. The index has been hovering below the 50 mark that separates growth from contraction for four whole months.
The PMI is regarded as a good indicator of economic health, being widely used for several years throughout the eurozone.
Chris Williamson, chief business economist at IHS Markit, claimed that the “eurozone service sector business activity rebounded in July to grow at a rate not exceeded for two years”.
Adding to this, he claimed that “France and Germany enjoyed especially strong gains though renewed growth was also recorded in Spain and Italy as COVID-19 containment measures continued to be relaxed.”
Whilst overall demand and optimism managed to surge during July, this was contrasted with the rise in job cuts, which rose very sharply. The employment index managed to stay below the breakeven at 46.5, still a worrying sign, despite it being better than June’s 43.2.
The services sector received a major boost with the reopening of bars and restaurants, leading to the services PMI to rising to 54.7 from the previous 48.3, with this being the highest it has been since September 2018, but still falling short of the forecasted 55.1.
Williamson added that “Whether the recovery can be sustained will be determined first and foremost by virus case numbers, and the recent signs of a resurgence pose a particular risk to many parts of the service sector, such as travel, tourism and hospitality”.
This statement comes after the services business expectations index was below the long-run average at 59.4, whilst disappointing, is still better than June’s 56.7.