IHS Markit PMI: Eurozone economy grows at fastest rate since June 2015

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Eurozone business activity grew at the fastest rate for 15 years in July, according to the latest IHS Markit Flash Eurozone PMI.



IHS Markit PMI: Eurozone economy grows at fastest rate since June 2015
Photo by Mika Baumeister on Unsplash

IHS Markit writes that the increased business activity is a result of steep manufacturing output growth complemented by an accelerated expansion of services activity.

After accounting for seasonal factors, the IHS Markit Eurozone PMI® Composite Output Index rose to 60.2, slightly below the preliminary ‘flash’ estimate of 60.6, but still surpassing June’s 15-year record of 59.5.

This was the fifth successive month in which private sector output has expanded, the longest uninterrupted sequence since the pandemic began early last year.

Other key observations made by IHS Markit are as follows:

  • among the four largest eurozone economies, the quickest rise was in Germany, where again the rate of expansion accelerated to a record high
  • in Italy, private sector activity growth jumped to a three-and-a-half year high, while Spain and France registered softer increases in output
  • survey data also revealed the quickest rise in demand for euro area goods and services since May 2000 in July
  • increased order book volumes reflected improvements in both domestic and international markets, as indicated by a rise in new export business
  • steep month-to-month growth in new business strained operating capacities across the eurozone immensely in July
  • businesses remained firmly optimistic that output would grow over the next 12 months

Commenting on the latest PMI, Chris Williamson, Chief Business Economist at IHS Markit said:

“Europe’s service sector is springing back into life. Easing virus restrictions and further vaccination progress are boosting demand for a wide variety of activities, especially in the tourism, travel and hospitality sector. It’s not just the consumer sector that is booming, however, with business and financial service providers also enjoying a growth spurt as broader economic recovery hopes build.

“Alongside the sustained elevated growth recorded in the manufacturing sector, the impressive strength of the service sector’s expansion in July means the eurozone should see GDP growth accelerate in the
third quarter.

“Worries about the Delta variant have become more widespread, however, subduing activity in some instances and raising concerns about the possibility of virus restrictions being tightened again. Hence
services growth in July was slightly less marked than the earlier flash estimate and future expectations cooled to the lowest since March, presenting a significant downside risk to the outlook and hinting that growth could begin to slow again as we head toward the autumn.”

“Furthermore, up to now companies have generally seen little resistance from customers to higher prices, but this could change after the current rebound from lockdown restrictions has passed.”

Photo by Mika Baumeister on Unsplash

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