Brussels (Brussels Morning) IHS Markit’s survey suggests that the eurozone economy will reach pre-crisis levels by the end of this year.
The survey shows that activity in the eurozone economy remained high in August despite fears about the coronavirus pandemic and ubiquitous supply chain disruptions, according to Reuters reporting on Friday.
IHS Markit’s composite purchasing mangers’ index (PMI), which is seen as an indicator of economic health, dropped from the 15-year high in July of 60.2 points to 59 last month. This is still significantly above 50, which separates growth from contraction, but below the “flash” estimate of 59.5.
IHS Markit economist Joe Hayes noted “it was another solid result for euro area businesses in August” and added “another strong quarter-on-quarter rise in GDP is on the cards for the third quarter, and we’re certainly on track for the eurozone economy to be back at pre-pandemic levels by the end of the year, if not sooner.”
Analysts who took part in a Reuters poll at the end of September predicted that eurozone GDP will grow 2.2% this quarter.
Supply chain disruptions caused by the crisis drove up the cost of raw materials this month, with HIS Markit’s input prices index dropping to 69.5 points from 69.9 in July.
Inflation at 10-year high
Inflation reached 3% in August, presenting a 10-year high, with further growth likely. This challenges the European Central Bank’s prediction that the rise of prices is temporary.
The services business expectations index dropped from 69.1 points to 68.9 in August, reaching a four-month low due to fears that epidemiological trends could spur authorities to reimpose lockdown measures.
“While growth will naturally lose some impetus as the post-lockdown boom peters out, there are a number of other downside factors at play,” Hayes pointed out and concluded that “the Delta variant has taken hold in Europe, while further material shortages and transport bottlenecks continue to restrain business activity.”