The Day at a Glance | June 3 2020

Slow recovery in Europe

IHS/Markit PMIs showed that the European economy continued to contract in May, even though the worst appears to have happened in April. The composite indicator reached 31.9 from 13.6 recorded in April, but is still contracting considerably. The recovery seen in the service sector has been greater than first estimated, but is still far from showing signs of expansion. According to the report, the European economy is heading towards a 11.3% contraction in the 2Q20 while companies keep showing the fastest rate of cutbacks in employment in history. The rate of unemployment has remained contained at 7.3% during April (vs 7.1% March) and contrast sharply with high rates of unemployment seen in other countries. Social security and government aid in the region have allowed most Europeans keep their job or their income, but the slower the recovery is, the more likely it is for companies to disappear. The expectation of demand remaining low in the continent because of an environment that threatens job security and consumer confidence could affect companies` investments and speed up the rate of unemployment. Markit is still cautious regarding its expectations of recovery in the European region.

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