U.S. service sector rebounds strongly in June - Reuters News

WASHINGTON, July 6 (Reuters) - U.S. services industry activity rebounded sharply in June, almost returning to its pre-COVID-19 pandemic levels, but a resurgence in coronavirus cases that has forced some restaurants and bars to close again threatens the emerging recovery.

The Institute for Supply Management (ISM) said on Monday its non-manufacturing activity index jumped to a reading of 57.1 last month, the highest since February, from 45.4 in May. It has bounced back from a reading of 41.8 in April, which was the lowest since March 2009.

A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of U.S. economic activity. Economists polled by Reuters had forecast the index increasing to a reading of 48.9 in June.

The report followed the ISM's manufacturing survey last week showing factory activity rebounding to a 14-month high in June. The upbeat surveys, however, have been overshadowed by raging COVID-19 cases in large parts of the country, including the densely populated California, Florida and Texas.

The flare-up in cases that started in late June has prompted several states to scale back or pause reopenings, hitting restaurants and bars hard.

The ISM survey's measure of new orders for the services industry increased to a reading of 61.6 in June from 41.9 in the prior month. There was an increase in export orders, and order backlogs swelled.

The survey's index of services industry employment rose to a reading of 43.1 last month from 31.8 in May.

Though this measure has pulled off 30.0 in April, a level last seen in 1997, it was at odds with a report last Friday showing nonfarm payrolls surging by a record 4.8 million jobs in June. The services sector accounted for 4.263 million of the jobs.

Euro zone investor morale up in July but recovery could stall - Sentix - Reuters News

BERLIN, July 6 (Reuters) - Investor morale in the euro zone improved for a third month running in July but a dip in expectations suggests the recovery from the impact of the coronavirus pandemic could soon peter out, a survey showed on Monday.

Sentix's index for the euro zone rose to -18.2 from -24.8 in June. That compared with the Reuters consensus forecast for a reading of -10.9.

The current situation index rose for a second month in a row, to -49.5 from -61.5 in June. However, the expectations index for the bloc dipped to 19.5 from 21.8.

"There is a danger that the 'upswing' could run out of steam as early as the summer," said Sentix managing director Manfred Huebner.

Investors said they expected that only around 60% of coronavirus-related economic losses would be recovered within a year in the euro zone.

In Germany, investors expect only around 65% to be made up within a year despite the government's economic stimulus package, with the expectations index also dipping slightly in Europe's largest economy.

Sentix surveyed 1,109 investors between July 2 and July 4.

Euro zone retail sales in record rebound in May as lockdowns eased - Reuters News

BRUSSELS, July 6 (Reuters) - Consumers in the euro zone returned en masse to shops in May as lockdowns were eased in the bloc, estimates from the EU statistics agency showed on Monday, signalling a sharp recovery of sales after record drops in March and April.

Sales in the 19 countries sharing the euro zone rose by 17.8% in May from April, Eurostat said, in the steepest increase since euro zone records for retail sales began in 1999.

The rise was higher than market expectations of a 15% rise on the month.

Compared to a year earlier, sales were still down 5.1% in May, showing the recovery is far from complete. But the year-on-year drop was less steep than the 7.5% fall forecast by economists polled by Reuters.

The month-on-month rise in May partly offset the record falls posted in the previous two months, with the volume of retail trade dropping by a record 12.1% in April and by 10.6% in March, Eurostat's revised data showed on Monday.

The agency had previously estimated a 11.7% month-on-month fall in April (Full Story).

Sales of clothes and footwear, the sector most hit by reduced trade during the pandemic, posted a 147.0% increase in May from April, although were still down 50.5% year-on-year.

Shoppers also increased by 38.4% their purchases of fuel for cars. Trade of electrical goods and furniture shot up by 37.9%. Books and computer equipment posted a 26.8% rise in sales.

Online sales kept growing by 7.0% in May. They were the only retail sub-sector in the euro zone that did not suffer any drop in trade during lockdowns.

Among the largest euro zone countries, retail sales went up by 13.9% in Germany and by 25.6% in France. May data for Italy were not available.

Moderate rebound in German industry orders points to slow recovery - Reuters News

BERLIN, July 6 (Reuters) - Orders for German industrial goods rose by 10.4% in May, rebounding from their biggest drop since records began in 1991 the previous month, data showed on Monday, as demand picked up after lockdown measures to fight the coronavirus were lifted.

The increase was weaker than a Reuters forecast for a rise of 15% and the Economy Ministry said a return to pre-crisis levels will be slow even though the economy is recovering.

The Statistics Office data showed that domestic orders rose by 12.3% while orders from abroad were up 8.8%.

The double-digit increase in the headline figure was mainly driven by a 20.3% rise in capital goods, including a 44.4% surge in the automotive sector.

"The orders data signal that the manufacturing sector recession has overcome its low point," the Economy Ministry said. "But the low level of orders also shows that the recovery process is far from over."

Order intake was 30.8% lower than in February, before lockdown measures were imposed to slow the spread of the coronavirus.

Germany has withstood the crisis better than most of its neighbours, suffering relatively fewer deaths from the virus. Its economy has also weathered the pandemic better, partly because it let factories and construction sites remain open.

The government is helping the economy weather the crisis with massive rescue and stimulus packages, including rolling out short-time work, a form of state aid designed to encourage companies to keep employees on the payroll during a downturn.

Still, the government expects the economy to shrink by 6.3% this year, its worst recession since World War Two.

"Today's industrial orders data brings two important messages: the lifting of the lockdown measures has brought V-shaped surges in activity but the return to pre-crisis levels will not be easy," said ING economist Carsten Brzeski.

UK construction rebounds from lockdown in June -PMI - Reuters News

LONDON, July 6 (Reuters) - Growth returned to British construction companies in June for the first time since the coronavirus lockdown began, albeit from low levels, a business survey showed on Monday.

The IHS Markit/CIPS UK Construction Purchasing Managers' Index (PMI) rebounded to 55.3 from 28.9 in May, its highest since July 2018 and well above the 50 threshold for growth.

Data company IHS Markit said growth was driven mostly by housebuilders, but commercial and civil engineering construction companies also reported an increase in activity.

"As the first major part of the UK economy to begin a phased return to work, the strong rebound in construction activity provides hope to other sectors that have suffered through the lockdown period," Tim Moore, economics director at IHS Markit, said.

The survey is designed to show which way business activity shifted during a month rather than its overall level. That means a return to a reading above 50 does not indicate a recovery to normal levels of construction output.

"While some survey respondents commented on cautious optimism about their near-term prospects, construction companies continued to face challenges securing new work against an unfavourable economic backdrop and a lost period for tender opportunities," Moore said.

They also continued to cut jobs at a fast pace, the survey showed.

Construction accounts for only about 7% of British economic output. A PMI survey last week painted a gloomier picture of the services sector, which is about 10 times larger. GB/PMIS

The all-sector PMI - which combines the services, manufacturing and construction sectors - rose to 48.3 in June from 29.9 in May.