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Euro-Area Manufacturing Stems Its Slump With Jobs at Risk

Piotr Skolimowski
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Euro-Area Manufacturing Stems Its Slump With Jobs at Risk

(Bloomberg) -- Factories across the euro area recorded a stronger performance than initially reported in June, with consumer-goods producers growing again.

But despite countries easing restrictions and life slowly returning to normal, output continued to contract and demand -- especially among exporters -- remained weak. In a sign that the pandemic has been inflicting lasting damage on the economy, all of the 19 euro-area members covered in IHS Markit’s survey recorded a decline in manufacturing jobs.

Airbus SE has embarked on the most extensive restructuring in its history, setting out plans to shed 15,000 civil-aerospace jobs, more than 10,000 of those at its main bases in Germany and France. That takes cuts across European airlines, aerospace manufacturers and airports above 160,000, based on data compiled by Bloomberg.

The region is at a critical point. While the initial rebound has been swift, it’s not yet clear whether momentum can be sustained. European Central Bank Executive Board member Isabel Schnabel cautioned against reading too much into early signs of recovery on Tuesday, arguing any progress is likely to be slow, with the crisis probably having scarring effects on the labor market.

“Euro-zone factories are seeing a strong initial recovery,” said Chris Williamson, chief business economist at IHS Markit, whose Purchasing Managers’ Index is consistent with a decline in output at an annual rate of just 2%, compared with 30% at the height of the crisis.

The final PMI rose to a four-month high of 47.4, from 39.4 in May, exceeding an initial estimate. Expectations for the year ahead turned positive amid hopes that a further easing of lockdown restrictions will underpin demand.

“Even with these gains, production and sentiment remain below pre-pandemic peaks, and persistent weak demand combined with ongoing social distancing measures are likely to act as a drag on the recovery,” Williamson said.

(Updates with Airbus in third paragraph.)

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