Hopes for 'v' shaped recovery grow

Fresh hopes of a “v” shaped economic recovery emerged today when the latest official figures were stronger than expected.

IHS Markit’s closely watched Purchasing Managers’ Index (PMI) was at 47.5 for June, up from 31.9 in May and the record low of 13.6 in April.

Any number above 50 is a sign of growth. A Reuters poll had predicted a more modest rise to 42.4.

“The flash euro zone PMI indicated another substantial easing of the region’s downturn in June. Output and demand are still falling but no longer collapsing,” said Chris Williamson, chief business economist at IHS Markit.

“While second quarter GDP is still likely to have dropped at an unprecedented rate, the rise in the PMI adds to expectations that the lifting of lockdown restrictions will help bring the downturn to an end as we head into the summer.”

Economists warned that the PMI data can be volatile and note that a surge in new Covid cases in the US, China and parts of Europe is dampening the mood.

Neil Birrell, chief investment officer at Premier Miton, said: “The Eurozone PMIs were better than expected, and much better than the previous month, which is how most of the data is coming out at the moment. The Services PMI stood out, showing that, as lockdown eases, corporates are getting more confident. But we should not forget that the absolute number is still not great.”

ING said in a note to clients: “Today’s PMI numbers provide further evidence of what initially looks like a textbook v-shaped recovery.”