Wednesday 1 July 2020 10:24 am

Eurozone manufacturing downturn eased in June as lockdowns loosened

The downturn in eurozone manufacturing was not as bad as initially thought in June after many countries in the bloc eased lockdown restrictions. 

IHS Markit’s final manufacturing purchasing managers’ index (PMI) reading for the bloc moved closer to the 50-mark separating growth from contraction last month, coming in at 47.4.

Read more: UK manufacturing activity steadies in June following historic slide

The reading marks a significant rise from May’s reading of 39.4 and comfortably ahead of an earlier flash reading of 46.9. An index measuring output in the bloc jumped to 48.9 from 35.6.

“The final PMI numbers for June add further to signs that the eurozone factories are seeing a strong initial recovery as the economy lifts from Covid-19 lockdowns,” said Chris Williamson, chief business economist at IHS Markit.

“Expectations for the year ahead have also rebounded sharply as hopes grow that the economy will continue to find its feet again in the coming months,” Williamson said. 

Over 10 million people have been infected by the virus globally and more than 500,000 have died, leading governments across the world to impose lockdowns and force businesses to temporarily close and citizens to stay at home.

Before the Open newsletter: Start your day with the City View podcast and key market data

Many countries within the eurozone moved to ease restrictions last month as they began to re-open their economies. 

The European Central Bank has expanded its pandemic-related bond purchases to a total of €1.35 trillion to help combat the historic economic downturn triggered by the pandemic. 

IHS Markit’s future output index, which gauges optimism about the coming year within the eurozone manufacturing sector, bounced back into positive territory at 57.3 from May’s 44.6. 

However all other indices remained stubbornly below the breakeven level, suggesting that the bloc’s manufacturing sector could be facing a slow and long recovery from the downturn.

Read more: UK to negotiate financial services trade deal with Switzerland

“Production and sentiment remain below pre-pandemic peaks, and persistent weak demand combined with ongoing social distancing measures are likely to act as a drag on the recovery,” said Williamson. 

“The focus therefore now turns to whether gains seen in the past two months can be built on, or if momentum fades again after this initial rebound.”