Surged purchasing managers‘ indices in July – Is the crisis already over?

European purchasing managers have become much more confident according to the IHS Markit survey in July. The Composite Purchasing Managers‘ Index, a comprehensive barometer of sentiment on the situation among service providers and in the manufacturing sector, rose 6.3 points to 54.8 points in July. This is the highest value since mid-2018, and is based on a significant improvement in sentiment in both areas of the private sector.

At first glance, one might almost think that the Corona crisis is over after a short but deep cut. But when looking more closely at the measurement figure, for example for the services sector, which achieved the largest plus in the monthly survey, one should not forget how it is collected. It is based solely on one key question, namely: „Is the level of business activity in your company higher, equal or lower than a month ago?

In view of the advanced easing of restrictions and the increase in (tourist) travel, it is no wonder that service providers report better business activity. Recently, however, reports of rising infection rates have increased again in many regions. In addition, according to IHS Markit, the industry is reporting further declining order books and employment intentions continue to decline. In our opinion, it is therefore definitely too early to declare an end to the economic crisis at this stage.

In Germany the composite purchasing managers‘ index rose by 8.5 points to 55.5 index points. This was due to a marked improvement in sentiment among both service providers and the manufacturing sector. The increased confidence is expressed in rising demand and a plus in export orders. However, order books are still shrinking and employment intentions in industry continue to decline.

In France, the purchasing managers‘ indices were able to stay above the neutral level of 50 index points at the beginning of the third quarter. Moreover, a marked improvement in the mood among service providers has caused the composite purchasing managers‘ index to rise from 51.7 to 57.6 points. This is the highest value since the beginning of 2018, whereas in the manufacturing sector the index declined somewhat, but only slightly.

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