Global Daily – Eurozone still in the acceleration phase

The outcome was higher than the consensus forecast of  58.8. The composite PMI is a weighted average of the Manufacturing PMI and the Services sector PMI activity index and tends to move in line with GDP growth. The jump in the composite PMI in June was completely due to a rise in the Services sector index, which rose to 58.0, up from 55.2 in May. This rise was due to the rapid unwinding of restrictions in large parts of the services sector, such as the sports, entertainment and leisure industry, shops and restaurants. As we mentioned in this note yesterday, this unwinding of lockdown measures has resulted in accelerating private consumption growth since the middle of May. The forward looking part of the services PMI suggests that this acceleration has further to go, with the expectations component jumping to 72.3 in June – its highest level in more than twenty years. The details of the composite PMI show that the job creation component increased as well (to 55.3, up from 53.8), but much less spectacularly than the total index. This suggests that employment is rising, but that companies will mostly increase the number of hours worked by employees that are in government subsidised short-time work schemes.

The manufacturing PMI was unchanged at 63.1 in June. It had already risen to historically high levels during the February-May, as world trade and the global industrial sector re-accelerated. We think its stabilisation in June is due to the global manufacturing sector normalising following a sharp rebound earlier this year, with catch-up effects fading. The details of the manufacturing PMI reveal that suppliers’ delivery times are still becoming longer, suggesting that bottlenecks in global supply chains have intensified. Although these bottlenecks are pushing up prices in manufacturing (the index for input prices in the manufacturing PMI  increased to 88.0 in June, up from 87.1 in May and that for output prices increased to 71.1 from 69.1), we expect these price pressures to fade when the impact of the unsynchronized shocks to supply and demand in global manufacturing during the pandemic wanes. For the more on the passthrough from producer prices to consumer prices, please see our recent note here. (Aline Schuiling)