Eurozone’s economic crash eases in May but area remains depressed
The Eurozone’s private sector showed some tentative signs of recovery but still remained mired in a deep downturn in May, survey data has shown.
The IHS Markit composite purchasing managers’ index (PMI), a closely watched guide to the economy’s health, rose to 31.9 in May from a record low of 13.6 in April.
May’s reading was higher than an initial estimate of 30.5 although it was nonetheless far below the historical average. A score below 50 officially signals that the economy contracted again compared to April.
However, analysts debate whether economies shrank again in May. Some have suggested the uptick in the PMI should be seen as a sign that things improved from April.
The survey indicates that the euro area’s services sector suffered another notable fall in output. Although it was at a much slower rate than in April, when Eurozone economies were in lockdown.
Companies sharply cut staff levels once again as they continued to be battered by the fallout from coronavirus. Meanwhile, business confidence remained in negative territory, although it was once again higher than March’s low.
Chris Williamson, chief business economist at data firm IHS Markit said: “The scale and breadth of the Eurozone downturn was highlighted by the PMI data showing all countries enduring another month of sharply falling business activity.”
Italy’s composite PMI rose to 33.9, Germany’s to 32.3 and France’s to 32.1. Spain’s came in at 29.2.
The weak PMI readings from across the Eurozone will fuel speculation that the European Central Bank (ECB) will turn on the stimulus taps once again tomorrow.
The ECB is expected to ramp up its coronavirus bond-buying programme as it seeks to smooth the path ahead for the zone’s troubled economies.
Williamson said IHS Markit remains cautious about the recovery. “Our forecasters expect GDP to slump by almost nine per cent in 2020 and for a recovery to pre-pandemic levels of output to take several years,” he said.