Eurozone business activity rose at its fastest rate since June 2006

According to the report from IHS Markit, eurozone business activity rose at its fastest rate in just over 15 years during July, with steep manufacturing output growth complemented by an accelerated expansion of services activity.

After accounting for seasonal factors, the Eurozone PMI Composite Output Index rose to 60.2, slightly below the preliminary ‘flash’ estimate of 60.6, but still surpassing June’s 15-year record of 59.5. This was the fifth successive month in which private sector output has expanded, the longest uninterrupted sequence since the pandemic began early last year.

Driving the broad acceleration in output growth was services, where activity increased at its fastest pace since mid-2006. Although manufacturing production rose at its softest rate in five months, the expansion was considerable and still outstripped that seen in the services sector.

Latest survey data also revealed the quickest rise in demand for euro area goods and services since May 2000 in July. Again, trends in new orders were similar to output, with more rapid demand growth for services contrasting with a slower pick-up for goods. Nevertheless, increased order book volumes reflected improvements in both domestic and international markets, as indicated by a rise in new export business. Although foreign demand rose at a marginally weaker pace than in June, it was still the second-fastest recorded since comparable data were first published in September 2014. The consequence of steep month-to-month growth in new business strained operating capacities across the eurozone immensely in July. This was evidenced by a survey-record rise in outstanding business and extended the current period of backlog accumulation to five months. However, notable efforts to bolster output potential were seen as employment increased at the fastest rate in almost 21 years.

Lastly, businesses remained firmly optimistic that output would grow over the next 12 months, although the degree of confidence slipped from June’s high (since 2012) to a four-month low.