Live A Little

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 theyve 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 its shaken off Mays 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 eurozones 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 itll 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 doesnt look like itll 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. Thats four weeks longer than 2018s previous peak, and its more bad news for semiconductor-starved companies like carmakers.

Originally posted as part of the Finimize daily email.

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