2020.07.2413:06:00UTC+00Eurozone Private Sector Logs Strongest Growth Since 2018

The euro area private sector expanded at the fastest pace in just over two years in July as economies continued to reopen after lockdowns were implemented to curb the spread of coronavirus, flash survey data from IHS Markit showed Friday.

The composite output index rose to a 25-month high of 54.8 in July from 48.5 in June. This was also above economists' forecast of 51.1.

The improvement in part reflected a technical rebound from recent lockdowns, as businesses and their customers increasingly returned to work following the further relaxation of Covid-19 containment measures across the region.

The survey showed that output expectations improved in July, and new order inflows picked up and job losses eased. Average prices charged for goods and services fell for a fifth month, the survey showed.

Both manufacturing and services returned to growth, with growth hitting 23- and 25-month highs respectively, in July.

The flash services Purchasing Managers' Index advanced to 55.1 from 48.3 in June. The expected reading was 51.0.

The flash manufacturing PMI came in at 51.1 versus 47.4 in June and forecast of 50.0. "The data add to signs that the economy should see a strong rebound after the unprecedented collapse in the second quarter," Chris Williamson, chief business economist at IHS Markit said.

"However, while the survey's output measures hint at an initial v-shaped recovery, other indicators such as backlogs of work and employment warn of downside risks to the outlook," Williamson added.

By country, French companies led the upturn, reporting a second successive month of output gains. France's composite output index climbed to 57.6 from 51.7 in June. The reading was also above economists' forecast of 53.5.

The acceleration in output growth was primarily driven by a sharp increase in services activity. The services PMI came in at a 30-month high of 57.8, up from 50.7 in June. The expected level was 52.3.

Meanwhile, the factory PMI fell unexpectedly to 52.0 from 52.3 in June. The reading was forecast to rise to 53.2.

In Germany, output rose for the first time since February, increasing to an extent not seen for almost two years. The composite output index rose to 55.5 in July from 47.0 in June. The reading was also above economists' forecast of 50.3.

The services PMI climbed to 56.7 from 47.3 in June and was above forecast of 50.5. The manufacturing PMI came in at neutral 50.0 versus 45.2 in June. The reading was forecast to rise moderately to 48.0 in July.