The Strategist

Analysts: US and Eurozone reveal difference in PMI dynamics


08/24/2020 - 11:33



As expected, the dynamics of the leading indicator of business activity in the euro area showed a slowdown in its growth after the initial surge amid the lifting of restrictions. In the US, on the contrary, the composite PMI showed a sharp rise due to the service sector, where employment was recovering - until the fears of its decline after the cancellation of the crisis benefits did not materialize.



pixabay
pixabay
The value of the composite index of business activity (PMI) in the countries of the euro area, calculated by Markit, in August fell from 54.9 to 51.6 points (a value below 50 points indicates a contraction in business activity, above 50 points - its growth), which indicates a slowdown in economic recovery. In particular, in services there was a decline from 54.7 to 50.1 points, the decline was also in the employment sub-index. In industry, on the contrary, the value of the output sub-index grew to 55.7 points (55.3 points a month earlier). At the same time, the composite PMI in the US increased immediately from 50.3 points in July to 54.7 points in August. The industrial index rose from 50.9 to 53.6 points due to an increase in the number of new orders and output, in the service sector, an increase in activity from 50 to 54.8 points was also accompanied by an increase in employment (51 to 55.2 points).

In Europe, businesses are cautious and wary of hiring new employees, Markit said. The latest values of the indicator confirm that the economic recovery will not be V-shaped, since the “mechanical” part of this process has ended due to the lifting of restrictions.

Nevertheless, formally, growth rates will be high against the background of a low base in the second quarter, according to ING Bank.
Note, according to Eurostat, the GDP of the EU countries decreased in April-June by 14.4% at once compared to the same period last year. In the euro area the decline was more pronounced - by 15% (in the first quarter - minus 2.5% and minus 3.1%, respectively). This fall was the strongest since the beginning of statistics, since 1995. Earlier, Euler Hermes estimated that in the third quarter real GDP would grow by 9% in Germany, by 15% - in Italy, by 16% - in France and by 17% - in Spain.

In the United States, fears of weakening employment growth due to the termination of payments of coronavirus benefits were overestimated - in the third quarter, GDP on an annualized basis could grow by 25%, Capital Economics expects. Recall that in April-June this year, the GDP contracted by 32.9% on an annualized basis, that is, if the economy was falling at such a rate during the year, then by the second quarter of last year, the decline had decreased to 9.5%.

source: ihsmarkit.com




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