Eurozone post-Covid economic rebound marches on at rapid clip

The economic recovery from the Covid crisis in the Eurozone continued to progress at a rapid clip this month, driven by a ramping up of the bloc’s vaccination programme allowing a further easing of pandemic restrictions, according to a closely watched survey released today.

IHS Markit’s latest flash Eurozone purchasing managers’ composite output index hit 59.5 in August, a marginal slowdown from 60.2 in July.

The Eurozone vaccination effort has picked up pace over the last month, significanlty reducing the health implications of catching coronavirus within the bloc.

Having a greater proportion of the area vaccinated has enabled nations’ respective policymakers to continue to lift restrictions on economic activity designed to curb the spread of Covid.

The easing of Covid prevention measures has provided a boon for firms in the services industry – such as pubs, bars and restaurants – that rely on social and face-to-face contact to generate income.

IHS Markit’s data shows business activity in the Eurozone’s services suffered a more muted hit compared to the manufacturing sector over the last month.

The company’s index measuring business activity in the services industry inched down to 59.7 in August compared to 59.8 in July, whereas the manufacturing sector recorded a steeper fall, dipping to 61.5 from 62.8 over the same period.

The deeper fall in the manufacturing sector has likely been driven by businesses struggling to contiunue to increase production to cope with soaring demand amid widespread shortages of key inputs.

Chris Williamson, chief business economist at IHS Markit, said: “The eurozone’s economic recovery retained impressive momentum in August.”

“Although the spread of the Delta variant caused widespread problems across the region, curbing demand and causing further supply issues, firms benefited from virus containment measures easing to the lowest since the pandemic began.”

A reading above 50 indicates a majority of firms reported expanding business activity.

Eurozone businesses continue to report historically high levels of input cost inflation, prompting a large proportion of them to pass on costs to consumers to protect margins.

Latest data shows Eurozone inflation is running at 2.2 per cent annually, higher than the European Central Bank’s target.

“Employment meanwhile grew at a rate matching July’s 21-year high as firms expanded capacity in line with the recent order book growth and promising outlook,” IHS Markit said.

Gemany recorded the highest rate of expansion within the bloc.