Business Activity in Eurozone is Witnessing a Modest Recovery

A survey showed that Eurozone business activity recorded a modest recovery in July as some restrictions imposed to prevent the spread of the Covid 19 were lifted.

Friday’s data showed the economy shrinking in the bloc by 12.1% in Q4, while a Reuters poll expected growth of 8.1% in July as companies began to return to normal.

Wednesday’s final Composite Purchasing Managers’ Index (PMI) from IHS Markit bounced to 54.9 in July from June’s 48.5, it had been below the 50 level which separating growth from contraction for four months.

“Euro zone service sector business activity rebounded in July to grow at a rate not exceeded for over two years,” said Chris Williamson, chief business economist at IHS Markit.

“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.”

Overall demand had increased and optimism improved, but companies again cut staff to a limit so that the employment index remained below parity at 46.5 although that reading was better than the 43.2 recorded in June.

Services PMI rose to 54.7 from 48.3, its highest since September 2018.