Sometimes, all it takes is one number to tell a much larger story. That number: 51.6.
Yesterday, IHS Markit's purchasing managers’ index for the 19-country eurozone dropped
to 51.6 in August from 54.9 in July. It’s a closely watched indicator
of business activity and its slippage reveals that, after a hot start,
Europe’s economic recovery has hit the breaks.
Summertime sadness
In these
pandemic times, economic slippage often correlates with rising
caseloads. And this week, European heavyweights Germany, Italy, and
France all reported their highest new coronavirus case numbers since the
spring.
- Spain, in particular, is experiencing a worse outbreak than its peers.
What’s going on: Europeans
like to travel to other European countries during the summer, and
countries opened up their borders to capture as much tourism revenue as
possible.
But when you
vacation in Mykonos, you risk getting a regrettable bicep tattoo and
bringing COVID-19 back to your community. Germany’s government said that
almost 40% of new infections were the result of vacationers returning home. Italy pegs it at 30%.
What now?
Travel windows are tightening across the continent to slow down the flow of people and the virus.
But many European leaders agree: We’re not going back to the lockdown days of balcony singalongs.
- “We cannot shut down the
country, because the collateral damage of confinement is considerable,”
French President Emmanuel Macron told a magazine this week.
- “Politically, we want to avoid closing borders again at any cost,” said German Chancellor Angela Merkel Thursday.
The new strategy is to identify local clusters of infections and stamp them out before they can spread across the country.
Looking ahead...the European economy is still expected to boom this quarter following historic shrinkage in the spring (UK retail sales are already above pre-pandemic levels). But the extent of the rebound will depend on reversing the worrying trend in case numbers.
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