The manufacturing activity in the Euro zone is continuing on a recovery path in August, media surveys showed, but the managers of factories were cautious about hiring workers and investing as the pandemic was still happening. Manufacturing output, seen not declining as sharply as the service industry during the peak of the pandemic, had increased for two-consecutive months.
Final result of August’s Purchasing Managers Index (PMI) by IHS Markit shows a slight decline from July’s 51.8 to 51.7, but the reading is still showing growth above the 50.0 threshold separating from contraction. The changes in output index, which concludes into a PMI composite seen as a significant barometer of economic health, had risen from 55.3 in July to 55.6, the highest level since April 2018, just slightly below the previous projection of 55.7. The factory output for the Euro zone had increased strongly again, giving reassuring indication that the production will sharply rebound in Q3 after the Q2 collapse, IHS Markit’s Chief of Business Economy, Chris Williamson noted.
Although optimism is rising after the two-year-high reading, factories had ordered few materials and reduced the number of the employees. Index for employment still sinked below the 50.0 threshold, on 44.2 in August, but the reading is still higher than July’s reading of 42.9.
Williamson added that the latest survey key theme is firms had been taking a guarded approach to the spending and costs, most notably seen in hiring and investment, as the strength of the future demand are still unknown and uncertainty over the pandemic course. The media survey of economists last month also predicted that the Euro zone full recovery from the current deepest recession on record will take approximately two years or more.
