Eurozone PMIs recover brushing aside supply chain and delta concerns - ING

Bert Colijn, a senior economist at ING, notes that better than expected Eurozone PMIs confirm the strong rebound expected for 3Q.

"The composite PMI increased from 59.5 to 60.6 in July, which is the highest reading since 2000."

"Easing restriction measures are boosting service sector activity at the moment, but concerns about the spread of the Delta variant resulted in a somewhat weaker business outlook for the year ahead. The manufacturing PMI ticked down slightly as supply chain problems are biting and cause production to be delayed."

"Still, the picture painted by the survey is very rosy. Employment is rebounding quickly, new orders for manufacturing and services continue to grow rapidly, and reported recent activity ticked up in general, meaning that July has been a solid start to 3Q. The response to the Delta variant adds some uncertainty to the outlook, but expect the general direction of growth to be positive for now."

"The PMIs once again confirm significant pipeline inflation pressures, especially for goods. Of course, the ECB will consider this transitory as it has said before but expect the debate to become more heated in the months ahead when a decision needs to be made about the end of the PEPP programme."