Eurozone Sentix Investor Confidence rose to 29.8 in July, up from 28.1, but missed expectation of 30.2. Nonetheless, it’s still the 5th increase in a row, and highest since February 2018. Current situation index rose from 21.3 to 29.8, 5th increase in a row, and highest since October 2018. Expectations index, however, dropped from 35.3 to 29.8, lowest since December 2020.

Sentix said, “the result is impressive” but, “we are approaching a certain point of maximum momentum in the short term” as expectations dropped. “For the economy as a whole, this is not yet a worrying decline. For the equity markets, on the other hand, which are very much focused on investor expectations, this development could contribute to increased market volatility.”

It added, “in this environment, the ECB remains in focus. So far, there is no sign of a turn away from the expansive monetary policy. However, the inflation barometer, which remains clearly in negative territory at -38.25, underscores the danger of further rising inflation rates in a globally increasingly synchronised, strong economic upswing.”

Full release here.

Eurozone PMI Services was finalized at 58.3 in June, up from May’s 55.2. PMI Composite was finalized at 59.5, up from May’s 57.1. That’s also the highest level in 15 years since June 2006. Looking at some member states, Ireland PMI composite dipped to 2 month low at 63.4. Spain hit 256-month high at 62.4. Germany hit 123-month high at 60.1. Italy reached 41-month high at 58.3. France also reached 41-month high at 57.4.

Chris Williamson, Chief Business Economist at IHS Markit said: “Europe’s economic recovery stepped up a gear in June, but inflationary pressures have also ratcheted higher… A wave of optimism that the worst of the pandemic is behind us has meanwhile propelled firms’ expectations of growth to the highest for 21 years, boding well for the upturn to gain further strength in coming months.

“Firms are increasingly struggling to meet surging demand, however, in part due to labour supply shortages, meaning greater pricing power and underscoring how the recent rise in inflationary pressures is by no means confined to the manufacturing sector. Service sector companies are hiking their prices at the steepest pace for over 20 years as costs spike higher, accompanying a similar jump in manufacturing prices to signal a broad-based increase in inflationary pressures.”

Full release here.

Eurozone PMI Manufacturing was finalized at 63.4 in June, up from May’s 63.1. The index also set fresh record for a fourth successive month. Markit said production increased sharply whilst job growth hit survey peak. Prices also rose at record rates as supply-side constraints persisted.

Looking at the member states, PMI manufacturing of the Netherlands dropped to 2-month low at 68.8. Austria hit record high at 67.0. Germany (65.1), Ireland (64.0), Italy (62.2), Spain (60.4) France (59.0) and Greece (58.6) all posted strong readings.

Chris Williamson, Chief Business Economist at IHS Markit said: “The sheer speed of the recent upsurge in demand has led to a sellers’ market as capacity and transportation constraints limit the availability of inputs to factories, which have in turn driven industrial prices higher at a rate not previously witnessed by the survey… Encouragingly, there are several survey indicators which add to hopes that the current spike in prices will prove transitory.”

“Widespread issues such as port congestion and a lack of shipping containers should soon fade as the initial rebound from the pandemic passes. Similarly, recent months have seen safety stock building as companies seek to protect themselves against potential future supply-chain disruptions, which has exacerbated the imbalance of demand and supply in the short-term. Once sufficient stocks are built, this effect should likewise fade.

“Finally, we have also seen the expansion of capacity via record employment growth and greater capital expenditure on business equipment and machinery. This expansion should raise output in sectors that are currently straining to meet demand, and hence remove some of the upward pressure on prices for these goods.”

Full release here.