Europe : activity recovery seems short lived

6th October 2020
-IAM, News

Hugues Chevalier, Economist

The Euro area global activity index (PMI composite) has stepped back in September to 50.1, against 54.9 in July, suggesting a slowdown of the momentum of the rebound and a stagnation of the economic growth at the end of Q3. This slowdown is due mainly to the service sector which has fallen back into contraction after only two months of positive increase. Services are seriously affected by the increasing numbers of new Covid19 contaminations and by new restrictions applied to avoid a second wave. Meanwhile, industrial sector continues its rebound and has shown in September its highest numbers for two years. Indeed, industrial production in Germany, and especially export manufacturing activities, pull the whole sector in Europe. This momentum has been confirmed by the IFO survey and the perspectives for the next months are not only well oriented but also have reached now their January 2018 level. However, for 2020 Q4, despite the dynamism of the industrial sector, the new restrictive measures implemented in the services will impact negatively the economic growth and a new slowdown of the GDP is expected at a rate of less 4%.