Image source: Surasak Klinmontha, Oleg Novoseltsev - Shutterstock
What's going on?
So there is fun to be had without logging onto Zoom: data out on Wednesday showed European business activity climbed at its fastest rate in 15 years in June.
What does this mean?
Monthly business activity surveys ask company purchasing managers how busy they’ve been compared to the month before, providing a near real-time snapshot of economic performance. And it was all good news for the eurozone, whose newfound growth was led by a manufacturing industry that now looks like it’s shaken off May’s sluggishness. Services activity continued to climb too, as the hospitality sector – and all the parched revelry-seekers – emerged blinkingly from lockdown. That uptick was particularly pronounced in Germany, which helped drive overall business activity in the eurozone’s biggest economy to its highest in a decade.
Why should I care?
For markets: Growing pains.
Economic growth came at a cost: the average prices paid by European managers for goods and services rose at their fastest since 2002. Suppliers are still struggling with both staff and stock shortages, and manufacturing and services companies alike are passing on higher costs to their customers. That may put more upward pressure on official inflation figures in the next few months. The European Central Bank reckons it’ll only be temporary, but investors are worried that if it persists, it could force the bank to raise interest rates and, in turn, drive down stock and bond prices.
The bigger picture: These shortages are a drag.
The most obvious victim of those recent global supply shortages are microchips, which doesn’t look like it’ll change anytime soon: new research this week showed that the average gap between ordering a chip and receiving that order widened to a record 18 weeks in May. That’s four weeks longer than 2018’s previous peak, and it’s more bad news for semiconductor-starved companies like carmakers.
Originally posted as part of the Finimize daily email.
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