According to the report from IHS Markit, eurozone business activity grew at the fastest rate for 21 years in July as the economy continued to reopen from COVID-19 restrictions. The strongest rise in service sector activity for 15 years was tempered, however, by a slowing in manufacturing output growth, linked in many cases to worsening supply lines. Prices charged for goods and services meanwhile rose at a pace unseen prior to June as demand again outstripped supply. Backlogs of work rose at a joint-survey record rate amid capacity constraints. Business confidence meanwhile took a hit from rising concerns over the delta variant, pushing sentiment for the year ahead to a five-month low.

The headline Eurozone Composite PMI rose from a 15-year high of 59.5 in June to 60.6 in July, its highest since July 2000. The July reading indicated a fourth consecutive month of accelerating business activity. This acceleration of growth has coincided with a steady easing of COVID-19 restrictions from a peak in April to the lowest since the pandemic began in July. A further increase in demand was also recorded, boding well for the strong upturn to be sustained into August, as new order growth measured across both manufacturing and services accelerated to the fastest since May 2000. However, the recent surge in demand continued to put pressure on operating capacity to a degree unprecedented in the survey’s history. The resulting steep rise in backlogs of uncompleted work matched the record increase seen in June.

Finally, while July’s growth surge was commonly linked to the further easing of virus restrictions, business optimism for the outlook was stifled by growing worries about the delta variant. Expectations for output in the year ahead slipped from June’s record peak to the lowest since February, with lower optimism recorded across the board but slipping most notably in services and in France.