FILE PHOTO: Workers put on protecting masks on the Volkswagen meeting line in Wolfsburg, Germany, April 27, 2020. Swen Pfoertner/Pool by way of REUTERS
August 23, 2021
By Jonathan Cable
LONDON (Reuters) -Enterprise exercise within the euro zone grew strongly this month, solely dipping from July’s two-decade excessive month-to-month tempo, as a speedy COVID-19 vaccination drive allowed extra companies to reopen and clients to enterprise out, a survey confirmed.
With out ongoing provide chain disruptions, exercise might have expanded sooner, however fears new coronavirus strains could result in renewed restrictions continued to dent optimism.
IHS Markit’s Flash Composite Buying Managers’ Index, seen as a information to financial well being, fell to 59.5 in August from 60.2 final month. It was forward of the 50-mark separating progress from contraction however simply shy of a Reuters ballot estimate for 59.7.
“The euro zone financial system is firing on all cylinders once more as reopening has had the anticipated constructive impact on progress. Considerations in regards to the influence of the Delta variant and enter shortages stay however haven’t derailed the rebound up to now,” mentioned Bert Colijn at ING.
Each the providers and manufacturing indices remained in progress territory in Germany, confirming Europe’s largest financial system was on a restoration path, an earlier survey confirmed.
Financial progress in Germany might miss projections this yr and the resurgence of the pandemic could put surprising pressure on the financial system within the autumn, the Bundesbank mentioned in a month-to-month report on Monday.
In France, the bloc’s second-biggest financial system, progress in enterprise exercise slowed in comparison with July however remained resilient, as issues with provides of products and COVID-19 well being protocols impacted commerce.
However Britain’s post-lockdown financial bounce-back slowed sharply as firms struggled with unprecedented shortages of employees and supplies, though robust inflation pressures cooled.
“Total, August’s flash PMIs underline two key dangers to our forecasts. First, that the financial restoration is likely to be slowing a bit sooner than we had thought, posing a draw back danger to our view that the financial system will return to its pre-pandemic degree by October,” mentioned Kieran Tompkins at Capital Economics.
“Second, that supplies and employees shortages would possibly feed into second-round results of rising wage progress, that means that inflation is increased for longer.”
Markets had been unmoved by the PMI information and had been as a substitute centered on worries in regards to the Delta variant hampering progress as buyers weighed up the potential timeline for the tapering of financial stimulus forward of Federal Reserve Chair Jerome Powell’s speech at Jackson Gap this week. [MKTS/GLOB]
Companies elevated headcount within the euro zone at a near-record tempo however had been nonetheless unable to finish all new enterprise coming in, increase a backlog of labor on the third-fastest tempo in survey historical past. The composite employment index held at 56.1.
A PMI masking the bloc’s dominant service business nudged all the way down to 59.7 from July’s 15-year excessive of 59.8. The Reuters ballot had predicted 59.8.
Demand slowed marginally from July – suggesting the rebound will proceed – however the providers enterprise expectations index, which measure optimism in regards to the yr forward, dropped to 68.6 from 69.1.
“We proceed to see the potential unfold of extra virulent virus variants and the prolongation of provide chain points as the primary dangers to the financial restoration,” mentioned Maddalena Martini at Oxford Economics.
“Subsequently, the extent of uncertainty across the forecast stays very excessive, however we nonetheless count on a robust restoration over the approaching quarters.”
Producers had one other strong month, their PMI remaining nicely above the breakeven mark at 61.5, albeit beneath July’s 62.8 and the 62.0 ballot estimate. An index measuring output that feeds into to the composite PMI fell to 59.2 from 61.1.
However provide delays – the supply instances index was close to a survey low – once more performed a key position in driving up the prices of the uncooked supplies factories want. The enter costs index was 87.3, though down from July’s report excessive of 89.2.
(Reporting by Jonathan Cable; Modifying by Catherine Evans, Nick Macfie and Barbara Lewis)