With the further relaxation of the economic blockade and more workers returning to work, the economy in eurozone and Britain showed signs of a strong rebound in July. At the same time, the economic data of the United States in July was not as expected. With the rebound of the epidemic and the stagnation of the restart process, the future economic prospects may be more bleak.
Eurozone's economic rebound exceeds expectations
according to the latest data, as the corporate blockade continues to relax, the output growth of the euro zone consisting of 19 countries in July reached the highest level in more than two years. The preliminary valuation of manufacturing purchasing manager index (PMI) in the eurozone in July rose to 47.4 from 51.1 in June, which greatly exceeded the market expectation and reached a 19-month high, this is to stand on the 50 boom line again after 17 months.
The service industry's PMI rose to 48.3 from 55.1 in June, and the composite PMI was 54.8, which was the first time that this index exceeded 50 since the outbreak of the epidemic. At the same time, these two indexes reached 25-month highs respectively, and the range of rebound was much higher than previous investors' expectations. After the outbreak of the epidemic, eurozone's PMI dropped to 13.6 in April, the lowest level in history. It rose back to 30.5 in May and continued to rise to 48.5 in June.
Chris Williams, chief business economist of axin Huamai company, said that the eurozone economy experienced an unprecedented collapse in the second quarter. However, the data show that with the restart of economic activities, the production in the eurozone increased at the fastest speed in more than two years in July, and the demand also showed signs of recovery. The eurozone is likely to achieve a strong rebound. Williams warned that although the eurozone economy "initially showed a sign of V-shaped recovery", many industries were just completing the previous backlog of orders and might face new problems in the future.
At the same time, some indicators reflecting employment are not optimistic. Eurozone still faces problems such as reduction of employees by enterprises and insufficient market demand, and there are downside risks in economic prospects. Williams said, "demand needs to continue to improve in the next few months. What worries people is that after the initial period of growth, the rise of unemployment rate and the damage of balance sheet may hinder the recovery, and the pace of economic growth may stagnate." Lagarde, president of the European Central Bank, also warned that the economic recovery is still in the early stage, and the recovery situation of the country and the industry is still "uneven".
In France, the consolidated PMI in July was 57.6, a new high in 30 months; In July, the service industry's PMI rose from 50.7 to 57.8; In July, the manufacturing industry's PMI rose to 52.6. According to the analysis, due to the accumulation of a large number of orders and the unmet demand during the period of economic outage, the output of French service industry and manufacturing enterprises in July has been increased.
Eliot Kerr, an economist from IHS Markit, a market research institution, said: As more and more businesses restart, consumers begin to regain their consumption habits and domestic demand picks up. It is expected that the steady increase of demand will provide confidence for enterprises and start recruitment activities, so as to better promote the recovery of economic output to the pre-epidemic level.
In that month, the initial value of the German manufacturing industry's PMI rebounded strongly, reaching the 50 boom line for the first time since February, 2019, far exceeding the market expectation. Germany's 7-month comprehensive purchasing managers index (PMI) rose to 47.0 from the last month's final value of 55.5, the highest point in the past two years; Germany's 7-month service industry PMI rose to 47.3 from the last month's final value of 56.7, it is the highest point in the past two and a half years. The data show that with the recovery of economic activities and demands, the business environment across Germany is improving, and German economy remains on the track of recovery.
In addition, according to a report released recently by German market research institution jiefukai, the leading index of German consumer confidence rose for the third consecutive month in August, which was minus 0.3 points, it is 9.1 points higher than the final value after adjustment in July. According to the report, the German government's economic stimulus plan is conducive to the recovery of consumer confidence and German economy within a reasonable time, but the premise is that the number of newly confirmed cases in Germany remains at a low level and the epidemic situation does not rebound. The German government previously announced that the VAT rate would be lowered from July 1 this year to December 31.
British economic data has improved
not only the eurozone, but also the manufacturing industry of Britain in July showed a strong rebound trend. According to the monthly index released on 24th by the market research institution axin Huamai company, the comprehensive purchasing managers index (PMI) of Britain in July was 57.1, reaching a new high in June, 2015; in July, the manufacturing industry and the service industry in Britain were 53.6 and 56.6 respectively, which were both higher than expected values.
Ashin Huamai Company and British chartered Procurement and Supply Association said in a statement that with the gradual lifting of restrictive measures related to the epidemic, the data in July showed that the business conditions of British private economy had improved significantly. British service industry resumed growth in July, and the growth momentum of manufacturing industry in July was more rapid than that in June. The statement also said that the number of new orders in Britain increased only slightly in July, indicating that the demand was still at a relatively low level. In addition, the job market continues to deteriorate, and many families continue to be cautious in spending.
Williams analyzed that the British economy had a strong start in the third quarter, and after experiencing the worst contraction in history in the second quarter, the British economy might resume growth in the third quarter. Although there was a rebound in July, there was still a long way to go to recover the output loss caused by the epidemic. Although enterprises are more optimistic about the future of the next year, the economy still cannot guarantee a V-shaped recovery.
In addition, zero sales in Britain rebounded sharply in June. Statistics from the National Bureau of Statistics show that due to factors such as allowing shops to re-open in England in June, the sales of zero sales in Britain in June increased by 13.9% month on month, and the performance has rebounded to close to the pre-epidemic level.
Andrew santans, the senior adviser of "Cambridge Econometrics", the British economic advisory body, said that the retail sales in Britain rebounded strongly in June, "This is the most active recovery index we have seen so far." Andrew Goodwin, the chief British economist of Oxford Economic Research Institute, a British think tank, said, "the risk of retail falling down in autumn is still very high", because the suppressed demand will be released quickly, and consumers may return "consumption mode to social consumption".
U.S. economic prospects may be more bleak
while the economy of eurozone and Britain showed a recovery trend in July, the economic data of America in July was not ideal. According to the data released by IHS Markit, the initial value of the United States consolidated PMI in July was 50; The initial value of the service industry in July was 49.6, the highest in six months, but lower than the 51 expected by the market; the initial value of the manufacturing industry in July was 51.3, the highest in six months, but still less than the market expectation of 52.
In this regard, Williams analyzed that although the stabilization of American commercial activities in July was gratifying, the lack of growth was disappointing. In addition, the accelerated loss of new business also worries the market that demand is still weak. Many companies, especially consumer companies, are obviously dragged down by the re-blockade of many places in the United States. Their costs are increasing spiritually, especially in the service industry. Preventing the spread of the epidemic has also increased the cost burden of enterprises. Meanwhile, in view of the weak current orders, the company is still cautious about hiring more employees.
According to data from the US Department of Labor, as of the week of July 18th, the number of people applying for unemployment benefits for the first time increased by 109,000 to 1.416 million month on month. This index exceeded 1 million in the 18th consecutive week and rose for the first time in the past four months, which implied that the US labor market had fallen into stagnation again under the condition of the surge in the number of new cases. David Melick, Chief American economist of Goldman Sachs, said that some states need to suspend more consumption activities to control the spread of the virus, while the stagnation of the economic restart process will cause longer-term damage to enterprises and the job market.
A few days ago, more than 100 American medical experts published an open letter calling on American decision makers to set priorities and stop restarting the economy immediately. The analysis pointed out that the severe epidemic situation in the United States caused many places to suspend and withdraw the business restart plan, which cast a shadow on the expectation of the rebound of economic activities in the second half of the year. A few days ago, Reuters quoted the results of a survey conducted by dozens of economic analysts in July and reported that their prediction of the economic prospect of the United States became more bleak. In view of the worst situation that may happen to the U.S. economy, the median of the survey results shows that the U.S. economy will shrink by 40.4% in the second quarter, and will not grow in the third and fourth quarters. The economy will shrink by 9% in the whole year of this year.
Source: Economic Information Daily