Survey data show business activity powering ahead in eurozone


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Although not official data, the international nature of IHS Markit’s monthly purchasing managers’ index (PMI) makes it a useful tool for comparing economic progress. Provisional readings for the July survey, published today, offer some useful pointers on the pace of recovery from the pandemic.

Results for the eurozone were particularly promising. Businesses in the bloc reported their fastest rate of expansion in activity for 21 years, fuelling hopes of a swift economic bounceback this summer, with the index having risen to 60.6 in July from 59.5 in June. A reading over 50 indicates a majority of businesses reported an expansion in activity from the previous month.

Line chart of purchasing managers index showing sharp rebound in eurozone business activity

Official GDP data for the second quarter published next week are expected to confirm that the eurozone has already emerged from its double-dip recession, with the PMI data suggesting progress is continuing into the third quarter. 

By contrast, the PMI reading for the UK showed growth in economic activity slowing, falling from 62.2 in June to 57.7 in July, as rising coronavirus infections “cast a darkening shadow” on the country’s recovery. More encouragingly, official retail sales for June, which were also published today, revealed a surprise rise from May — albeit with an extra boost from the Euros football tournament. Additionally, a consumer confidence survey from GfK suggests optimism among Britons is back at pre-pandemic levels.

Business activity in the US, while also still expanding, showed a similar slowdown in the pace of growth to the UK’s, as the PMI headline reading fell from 63.7 to a four-month low of 59.7. Official data for second-quarter GDP are set to be released next Thursday.

Inflationary pressures, supply chain problems and labour shortages are major sources of uncertainty for businesses in all three regions. The particular concern for the US, noted Chris Williamson, chief business economist at IHS Markit, is that “this drop in confidence could feed through to reduced spending, investment and hiring, adding to the possibility that growth could slow further in [the] coming months”.

Global economy

Russia raised its key lending rate by 1 percentage point — its biggest increase in more than six years — in its latest attempt to curb rising inflation, which hit 6.5 per cent in June — the highest level in five years. The country has recovered faster than expected from pandemic lockdowns, with economic output returning to pre-pandemic levels in the second quarter.

The FT Editorial Board said US president Joe Biden should keep Federal Reserve chair Jay Powell in place when his first term expires in February. It commended his decisiveness in dealing with the pandemic and preventing the downturn becoming a financial and banking crisis as well. “Powell’s reappointment is as clear a case as any of if it ain’t broke, don’t fix it,” the FT said.

European economics commentator Martin Sandbu discussed what the different methods of Covid-19 testing in the UK and in his native Norway say about different approaches to capitalism. Like the humble car wash, they can either feature intensive use of low-productivity labour (the UK) or the more productive method of investing in new technology (Norway).


The UK “pingdemic” saga continued, with the government introducing an emergency plan to mitigate staff shortages in the food industry. The move came after more workers were informed by the NHS Covid-19 app that they had been in contact with an infected person and must self-isolate. About 619,000 people were “pinged” in the week to July 15 and ministers have urged the public not to delete the app from their phones. Here’s our assessment of how three key sectors have been affected: retail, hospitality and manufacturing.

Labor Day, the first Monday in September, has long marked the end of summer in the US. US business editor Andrew Edgecliffe-Johnson examined how the spread of the Delta variant of coronavirus has damped down company hopes that the holiday might be followed by a mass return to the office.

Graph showing US searches for "dress shirts"

US airlines are returning to profitability more rapidly than their European peers thanks to government aid, a large domestic market and a relatively swift vaccination programme. Three out of the four major US carriers reported a profit in the second quarter, but demand in Europe has been hampered by higher rates of Covid-19 and fluctuating travel restrictions.


A split has opened among policymakers after the European Central Bank said, following its latest policy-setting meeting, that it would become more tolerant of inflation before raising interest rates. Malcolm Barr, head of western European economics at JPMorgan, wrote in the FT that the ECB strategy review was a missed opportunity. If “the ECB has the policy tools to return inflation to its objective, why does it not deploy them?” Barr asks.

Rising demand for electricity as economies reopen alongside supply disruptions and a drought in China, has caused a surge in thermal coal prices. Although renewable energy sources are growing, they will only be able to fulfil about half of global demand in 2021 and 2022, according to the International Energy Agency.

Line chart of high-energy Australian thermal coal ($ per tonne) showing world’s least-liked commodity soars in value

US financial commentator Robert Armstrong wonders in his Unhedged newsletter whether too much optimism about “pent-up” demand driving spending is being built into estimates of company earnings. “If shoppers are going to drive earnings, they have to shop significantly harder than they did before the crisis,” he writes.

Have your say

Hampshire Commuter comments on What will arise from the demise of mass commuting?

My company is about to go to a three days in the office, two at home. Which will significantly reduce my commuting time and allows for greater use of the local village amenities during the week.

I was however disappointed, but not surprised, to find out that the new “flexible season ticket” is poorly designed. The ticket allows you to travel eight days in a 28 day period (average two days a week). If, however, you average three days a week, it is cheaper to buy a full weekly or monthly ticket than it is to use the flexible season ticket. The reason I am not surprised is that it is another example of a government announcement that generates good headlines, but in practice doesn’t work as advertised.

Final thought

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