Eurozone flash PMI holds close to 15-year high
Eurozone business activity continued to grow at one of the strongest rates seen over the past two decades in August, according to the IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI), considered the most up-to-date indication of what is really happening in the private sector economy.
According to the IHS Markit, the rate of expansion in August cooled only slightly despite widespread supply chain delays. In a statement it said, ‘Service sector growth exceeded that of manufacturing for the first time since the pandemic, buoyed by the further reopening of the economy. Firms’ costs and prices charged meanwhile again rose at some of the fastest rates seen over the past 20 years as demand again outstripped supply.’
Despite the Delta variant of COVID-19 subduing business confidence, the report showed that hiring remained the strongest for 21 years as firms boosted capacity to meet rising demand.
The statement said, ‘The headline IHS Markit Eurozone Composite PMI® fell from a 15-year high of 60.2 in July to 59.5 in August, according to the ‘flash’ reading. The latest figure matched that seen in June to register the joint-second-fastest expansion seen since 2006. Growth in the service sector overtook that of manufacturing for the first time in the recovery from the pandemic as COVID-19 containment measures were eased further during the month to the lowest since the start of the pandemic.
Manufacturing output also continued to grow at a pace rarely exceeded in the survey history as a result of the ongoing recovery from the pandemic, though the rate of expansion moderated for a second month to the weakest since February. Slower production growth was primarily linked to supply chain constraints.
Inflows of new orders meanwhile remained among the highest seen in the past two decades, buoyed by ongoing resurgent demand for goods and services, though in both sectors the rate of increase cooled from recent highs to take the overall orderbook expansion down to the lowest since May. The sustained upturn in demand and improved prospects due to rising vaccination rates led to buoyant optimism about the year ahead.’
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said, ‘The eurozone’s economic recovery retained impressive momentum in August, with the PMI dipping only slightly from July’s recent high to put its average in the third quarter so far at the highest for 21 years. Although the spread of the Delta variant caused widespread problems across the region, curbing demand and causing further supply issues, firms benefited from virus containment measures easing to the lowest since the pandemic began. Supply chain delays continue to wreak havoc, however, leaving companies frequently unable to meet demand and pushing firms’ costs higher. These costs, combined with surging demand, led to another near-record increase in average selling prices for goods and services, though there are some welcome signs that these inflationary pressures may have peaked for now.’