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Eurozone travel restrictions take their toll

Friday, August 21, 2020

Friday 21 August proved to be an important day for testing the resilience of company outlooks around the world with eurozone, UK and US purchasing managers’ index (PMI) numbers. France’s services PMI recorded a third consecutive month of expansion but that is the only real positive message as it is slipping back to the 50 demarcation level at 51.9 (versus forecasts of 56.3). Manufacturing on the other hand has slipped into contraction territory at 49 (versus forecasts of 53). Germany showed a similar pattern with its services PMI coming in at 50.8, just eking into expansionary territory (against forecasts of 55.3) and manufacturing at 53, slightly ahead of forecasts of 52.2. As case numbers grow (albeit from lower levels previously seen at the start of the pandemic) it appears that the two leading economic power blocks in the eurozone are losing their growth momentum as travel restrictions take their toll. The broader eurozone PMI prints were only just in expansionary territory with services at 50.1 (compared to last month at 54.7 and forecasts of 54.6) and manufacturing at 51.7 (against forecasts of 52.7).

The UK situation was noticeably different with both services and manufacturing beating estimates but also expanding on last month’s expansionary numbers with prints of 60.1 and 55.3 respectively. A similar picture emerged in the US with both services and manufacturing PMI data strongly ahead of last month’s figures and also analysts’ forecasts.

To summarise, a divergent picture is still in place across the world’s economies and success or failure in Covid-19 responses still does not naturally translate into success or failure at the economic level.

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