According to the report from IHS Markit, eurozone business activity grew at a markedly reduced rate in September, reflecting the peaking of demand in the second quarter, supply chain bottlenecks and concerns over the ongoing pandemic. Business expectations for the coming year were also knocked by rising worries over the impact of the Delta variant on demand and supply chains, contributing to a further moderation in the rate of job creation from July’s 21-year peak. Firms’ costs meanwhile rose at the fastest rate in 21 years as demand again outstripped supply, with price rises increasingly feeding through from manufacturing to services.

The headline Eurozone Composite PMI fell sharply in September, dropping from 59.0 in August to 56.1 to indicate a further cooling of the rate of expansion from July’s 15-year high. The latest increase in business activity was the smallest since April, albeit still well above the survey’s pre-pandemic long-run trend to signal another month of above average strong growth.

Robust but slowing growth was recorded across both manufacturing and services, with the latter outperforming modestly. Whereas the service sector merely saw growth slip to the weakest since May, manufacturers reported the smallest production gain since January.