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The latest Purchasing Managers Index rose 57.6 from 51.7, beating economists forecast for a reading of 53.5. Demand also improved, led by domestic sales, with exports continuing to decline.
“The economy has entered its recovery phase following the Covid-19 lockdown,” said Eliot Kerr, an economist at IHS Markit, which compiles the report.
While the economy is improving, the labor market remains a key risk. The Markit report highlighted the unemployment threat, showing that private-sector firms cut jobs for a fifth straight month in July. As government support programs are scaled back, many companies may have to reduce costs to keep operating, which could mean more job losses down the line.