The historic eurozone economic downturn slowed markedly for the second month running in June as lockdowns were further relaxed, but a V-shaped recovery may be unlikely, according to new PMI surveys.
IHS Markit’s flash purchasing managers’ index (PMI) reading showed the eurozone hit a four-month high with a score of 47.5 in June.
Anything below 50 indicates a contraction. But the eurozone economy flash PMI improved markedly from April’s record low of 13.6, and May’s 31.9.
Manufacturing and services PMI readings for the bloc both also hit four-month highs at 46.9 and 47.3 respectively.
Chris Williamson, chief business economist at IHS Markit, said: “The flash eurozone PMI indicated another substantial easing of the region’s downturn in June.
“Output and demand are still falling but no longer collapsing. While second quarter GDP is still likely to have dropped at an unprecedented rate, the rise in the PMI adds to expectations that the lifting of lockdown restrictions will help bring the downturn to an end as we head into the summer.”
New business orders slumped for the fourth month running to contribute to the ongoing downturn in output. That also saw backlogs of orders experience a steep decline.
But services experienced a worse month than manufacturers, as hotels, restaurants, travel and tourism and other consumer-facing sectors continued to suffer in lockdown.
However, the eurozone PMI’s eased downturn helped firms reopen and drove demand for goods and services, IHS Markit said.
“As much as more than a month of (full) lockdowns had sent economies into a standstill, the gradual reopenings of the last two months have led to a sharp rebound in activity. However, it is anything but certain that the euro zone economy can maintain this momentum,” said ING economist Carsten Brzeski.
“Higher unemployment, companies going out of business, as well as plans to further cut back on staff and falling orders, suggest that the current V-shaped recovery could quickly run out of steam.”
Country-specific PMI readings showed that France led the eurozone’s economic improvement, but Germany lagged behind.
In France, business activity rebounded more than expected and returned to growth after three months of an unprecedented downturn.
A sharp improvement from May saw French PMI jump to 51.3, far exceeding the 46.3 that economists polled by Reuters had predicted.
The readings for Germany, the bloc’s largest economy, were much more downbeat.
The country’s composite reading came in at 45.8 – a figure which, despite being a four-month high, suggests Germany is on course for a slower recovery than some had expected.
“With the timing of a return to normal still something that can only be speculated upon, and virus-related restrictions likely to continue to hit many businesses for the rest of the year, we remain very cautious of the strength and sustainability of any economic rebound,” Williamson said.