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Eurozone, UK economies back to pre-coronavirus growth levels in July

Published: (Updated: ) in European News by .

The news suggests the economies could be faring better than expected.

The U.K. and eurozone economies are back to pre-pandemic levels of growth, surveys of private sector activity published today indicate.

Output across sectors of the economy showed the biggest increase in two years in the euro area and the biggest in five years in the U.K., according to provisional figures published by IHS Markit, a research company.

The U.K. composite output index was at 57.1 for July, with anything above 50 suggesting expansion. The eurozone’s composite stood at 54.8. The growth is a result of the lifting of lockdown restrictions across Europe, showing a “V-shaped” recovery.

The numbers, known as the Purchasing Managers Index, are based on opinion surveys with company leaders, and are highly influential in the financial sector.

At the same time, the gross size of the economy remains much below its level in February. Economists predict it will take until 2022 for gross domestic product to return to where it was before the pandemic, and worries remain that a more cautious population and increases in unemployment could be detrimental to such a rebound.

“The concern is that the recovery could falter after this initial revival. Firms continue to reduce headcounts to a worrying degree,” said Chris Williamson, chief business economist at IHS Markit.

“Demand needs to continue to recover in coming months, but the fear is that increased unemployment and damaged balance sheets, plus the need for ongoing social distancing, are likely to hamper the recovery.”

U.K. retail sales data for June, published this morning by the British Office for National Statistics, showed demand from consumers rising to levels seen before the coronavirus outbreak.

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The news adds to other recent indicators that suggest the European economy fared slightly better than feared through the COVID-19 crisis.


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