The pick up in euro-area economic activity after the lifting of lockdowns in June is doing little to change the picture of a long, slow recovery and rising unemployment.
The latest Purchasing Managers Indexes from IHS Markit showed an economic rebound underway, with French data unexpectedly signaling expansion for the first time in four months. But new business in the region continued to fall, employment declined and companies had to cut prices to help sales.
The report sums up the tricky picture for businesses across Europe, which are reopening after coronavirus restrictions but face circumstances that are far from normal. European Central Bank officials said this week that while risks of financial turmoil have receded significantly, the speed and scale of the recovery remain “extremely uncertain.”
“We remain very cautious of the strength and sustainability of any economic rebound,” said Chris Williamson, chief business economist at Markit. “The job market remains a particular area of concern, especially if demand fails to pick up sharply in coming months.”
With the outlook still uncertain, authorities are looking at ways to protect businesses and jobs as well as boost demand. In Spain, the government is weighing plans to significantly increase the size of its 100 billion-euro ($113 billion) loan-guarantee fund after the program attracted huge demand, according to people familiar with the matter.