Europe's economy bounced back sharply in June, but is not quite on track for a 'v-shaped' recovery yet, according to a widely-watched business survey
- Europe's major economies continued to bounce back from their coronavirus driven slump in June, according to a widely-watched set of business surveys.
- IHS Markit's Composite Purchasing Managers Index (PMI) posted better than expected readings for the Eurozone, the UK, France, and Germany. France even registered an expansion in activity.
- The PMI is a gauge used to track the economic direction of business trends in an economy.
- An investment director at GAM Investments said the markets will likely take only modest comfort from the latest economic health data as there isn't firm evidence of a strong 'V' shaped recovery for any economy.
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Europe's historic economic slump from the pandemic seems to be recovering better than expected this month, according to a set of widely-watched business surveys.
IHS Markit's Purchasing Managers Index (PMI) is a gauge used to track the economic direction of business activity in an economy. A reading of 50 would indicate a neutral or stabilized level of growth, above 50 exhibits expansion, and below 50 means stagnation.
During economic downturns, readings as low as 45 are expected ordinarily, while during expansion PMIs tend to linger in the mid-50s range. Until two months ago, these readings were at record lows for economies across the world.
Among a set of data released by IHS Markit on Tuesday, PMI for France turned out to be the highest.
IHS Markit's Composite PMIs recorded for June 2020:
- France: 51.3 versus 32.1 in May
- UK: 47.6 versus 30.0 in May
- Eurozone: 47.5 versus 31.9 in May
- Germany: 45.8 versus 32.3 in May
For the Eurozone, the relaxation of some lockdown measures and planned further easing in coming months helped propel business sentiment in June as the survey posted a four-month high reading of 47.5 compared to 30.0 in May.
Meanwhile, UK's PMI rose to 47.6 from 30.0 in May, adding to signs that the economy is likely to return to growth in the third quarter .
"The markets are likely to only take modest comfort from this high frequency data, and whilst not firm evidence of a strong 'V' shaped recovery in the UK economy or anywhere else for that matter, it is of some comfort nonetheless," said Charles Hepworth, investment director at GAM Investments.
For markets to continue making headways, broader and longer lasting PMI beats are needed and that would rely on the evolution of COVID-19 which remains uncertain, Hepworth said.