U.S. Economic Activity Picks Up While Europe Stalls -- 2nd Update
By David Harrison and Paul Hannon
Economic activity in the U.S. grew at the fastest pace in more
than a year and a half as businesses anticipated greater demand, an
easing of coronavirus-related restrictions and less uncertainty
following November's election, surveys of purchasing managers
The U.S. survey figures are the latest sign the economy
continues to recover from the shock created by the coronavirus
pandemic. Worker filings for jobless benefits so far this month
fell to the lowest level since the pandemic started, and
existing-home sales rose 9.4% in September, a 14-year high.
The surge in optimism stands in contrast with Europe, where a
resurgence of coronavirus cases is threatening to halt the region's
Data firm IHS Markit said Friday its composite Purchasing
Managers Index for the U.S. rose to 55.5 in October from 54.3 in
September, the highest level in 20 months. Among service firms, the
index increased to 56 from 54.6, while the manufacturing index
stood at 53.3, a slight rise from 53.2 in September.
A reading above 50.0 indicates that activity is increasing,
while a reading below points to a decline.
U.S. companies noted that demand slowed slightly in October,
particularly from abroad. Respondents to the survey said some
customers were still dealing with coronavirus-related disruptions
or had delayed new orders until after the election.
But that wasn't enough to dim respondents' bright outlook.
Business confidence in both services and manufacturing rose to the
highest level since May 2018, according to the survey.
Chris Williamson, chief business economist at IHS Markit, said
companies were increasingly hopeful about the prospect of another
round of federal stimulus, an easing of pandemic restrictions and
more certainty about the political situation.
"The U.S. economy looks to have started the fourth quarter on a
strong footing," he said.
Economists surveyed by The Wall Street Journal expect the U.S.
economy grew at an annualized rate of 28.5% in the third quarter.
That would represent a record growth rate, but it wouldn't be
enough to overcome the 31.4% decline in the second quarter. The
U.S. is set to release third quarter growth figures next
The U.S. is also seeing a fresh wave of infections, but the
number of cases hasn't yet passed the peak recorded in July. So
far, governments haven't imposed widespread restrictions, which has
helped businesses recover.
The picture is different in Europe, where a surge of new cases
has led to new restrictions on business activity. Spain limited
travel in and out of Madrid, banned social gatherings of more than
six people in the capital, and tightened operating hours of
restaurants and shops. Italy and France also imposed curfews or
other restrictions on businesses.
IHS Markit said its composite Purchasing Managers Index for the
eurozone fell to 49.4 in October from 50.4 in September. The
October measure indicates business activity fell for the first
month since June.
While growth will likely return if and when infections start to
fall again and restrictions ease, it isn't clear how long the
hiatus may last, and how long it will take for Europe to return to
pre-pandemic levels of output.
"These restrictions won't last only 15 days," said Nerea
Collell, a 29-year-old manager at Toni Restaurant in Mataró, a town
close to Barcelona. "If they linger for long I don't know what we
are going to do. I am very pessimistic about the near-term
Ms. Collell said revenue has fallen by 70% since the new
restrictions were introduced, and that the restaurant may soon have
to furlough some of its 35 workers.
A survey of households by the European Commission found consumer
sentiment fell to its lowest level since May, when some of the
restrictions put in place to contain the pandemic's first wave were
"A double-dip has become a realistic scenario for the fourth
quarter, and the dip in consumer confidence only adds to those
concerns," said Bert Colijn, an economist at ING Bank.
--Xavier Fontdegloria contributed to this article.
Write to David Harrison at firstname.lastname@example.org and Paul
Hannon at email@example.com
(END) Dow Jones Newswires
October 23, 2020 11:33 ET (15:33 GMT)
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