A closely watched measure of economic activity pointed to a continued rebound for the eurozone in June, led by France.
The latest purchasing managers’ index (PMI) from IHS Markit showed the “downturn eased markedly for a second successive month in June”.
The flash eurozone PMI came in at 47.5. PMIs are registered on a scale of 0 to 100, with anything above 50 signalling growth and anything below marking contraction.
While the estimate suggests the eurozone economy is still on course to shrink in June, the pace of contraction improved from May’s figure of 31.9.
“The flash eurozone PMI indicated another substantial easing of the region’s downturn in June,” said Chris Williamson, chief business economist at IHS Markit. “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.”
IHS Markit said the continued closure of hotels and restaurants, and the shutdown of the travel and tourism sectors more broadly, continued to drag on the eurozone economy. Factories and service sector businesses also saw a slump in new business.
France was the best performing eurozone economy. It returned to modest growth in June as lockdown measures eased.
“France has even staged a tentative return to growth, albeit having suffered a steeper decline at the height of the COVID-19 pandemic than Germany,” Williamson said. “Germany and the rest of the euro area meanwhile saw welcome moderations in rates of decline.”
Carsten Brzeski, chief eurozone economist and global head of macro at Dutch bank ING, said: “Even though currently some new local outbreaks underline that the virus has not disappeared and that risk of a second wave is still real, nevertheless, easing lockdowns has also revived the economy.”
However, Williamson said IHS Markit was “very cautious of the strength and sustainability of any economic rebound.” The data giant still expects the eurozone economy to shrink by 8% across 2020 and believes it will take the bloc three years to reach pre-pandemic levels of GDP.
Eurozone leaders are currently negotiating plans to borrow €750bn as a bloc to finance an economic recovery fund that would help repair the battered eurozone economy.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said of the IHS Markit survey data: “We are not about to make any major conclusions based on these numbers.
“It’s very likely that low base effects in France drove this month’s leap in the PMI, while the rate of improvement in Germany is smoother, due in part to the smaller hit in the first place.
“All we are willing to say with certainty at this point is that the slow improvement is still underway, a story confirmed by the details.”