European economic rebound slows as virus cases rise

The European economy’s rebound from the coronavirus recession slowed in August, as a pick up in new confirmed cases appeared to hobble the reopening of some businesses and travel from their near-complete shutdown in the spring.

An indicator of business activity by research firm IHS Markit fell back to a level that suggests the economy is barely growing after a relatively strong burst in July, when many countries had phased out the restrictions on public life that were imposed in the spring to contain the pandemic.

The purchasing managers’ index, which is based on a survey of 5,000 companies across the 19-country eurozone, dropped to 51.6 points in August from 54.9 in July. The 50-mark separates economic contraction from growth.

The economy’s drop in momentum coincides with an increase in virus cases in some European countries that is forcing governments to put limits on travel again and to reimpose new lockdown restrictions on some communities. Airlines have said the trend has hurt a recovery in travel in Europe as the news saps consumer confidence.

Companies are cutting jobs for a sixth consecutive month, though not by as much as in April, with layoffs biggest in the manufacturing sector.

Experts say the outlook for the economy is closely tied to the number of reported coronavirus cases and whether a second wave of outbreaks will keep schools from reopening and restrict shops, restaurants and other businesses from operating.

“The path taken will likely depend in large part on how successfully COVID-19 can be suppressed and whether companies and their customers alike can gain the confidence necessary to support growth,” IHS Markit economics director Andrew Harker said.