Band Indradip Ghosh
September 23 (Reuters) – Eurozone business growth has been much weaker than expected this month as restrictions to limit the Delta variant of the coronavirus hit demand and already exacerbated supply chain constraints pushed increases. input costs at a peak of more than two decades, according to a survey.
Although daily infection rates have slowed considerably over the past month, it is unlikely that most of the remaining restrictions will be lifted anytime soon in major economies, including Germany and France, amid concerns about the how the pandemic could develop in the coming months.
The IHS Markit Purchasing Managers Flash Composite Index, a good indicator of overall economic health, fell to a five-month low of 56.1 in September from 59.0 in August.
Although it remained above the 50 level separating growth from contraction for the seventh consecutive month, it was well below a Reuters poll estimate of 58.5.
“The September PMIs suggest that the pace of the recovery slowed further at the end of the third quarter, in part as the eurozone economy nears its pre-virus size, but also as energy shortages. ‘supply continue to be felt, “said Jessica Hinds, Europe economist at Capital Economics.
“Price pressures remain intense and high energy prices suggest they are unlikely to abate anytime soon.”
These supply distortions – one of the main price drivers around the world in recent months – are far from resolved and the upward trend in inflation is set to continue. A block-wide input cost tracking sub-index reached its highest level in 21 years.
European Central Bank policymakers recently recognized that risk price growth could exceed their relatively benign projections, but will curtail emergency bond purchases in the next quarter.
The Ifo Institute lowered its 2021 growth forecast for Germany to 2.5% on Wednesday, highlighting supply chain disruptions.
Purchasing manager surveys told the same story with Germany and France – the bloc’s two largest economies – experiencing slowdowns as bottlenecks drag activity. The manufacturing and service sectors both grew at a slower-than-expected pace.
In Britain, outside of the monetary union, the economy has also lost momentum as businesses face rising costs again. GB / PMIS
Optimism about future production has fallen to its lowest level in eight months. This contrasts with the improvement in consumption feeling, according to the latest data from the European Commission.
âSupply constraints increasingly weighed on confidence. Lower confidence was widespread,â said Peter Vanden Houte, chief economist at ING.
New services Business in the block grew at its slowest rate in five months, according to the PMI survey.
Weakening demand led factories to hire at the slowest pace in six months. During this time, their backlogs increased again at a sustained rate, signaling worsening supply constraints.
“Overall, today’s data confirms our expectation that, contrary to the ECB’s forecasts, economic growth in the euro area will weaken significantly in the last quarter,” said Christoph Weil, senior economist at Commerzbank.
(Reporting by Indradip Ghosh; Editing by Hugh Lawson)
((Indradip.Ghosh@thomsonreuters.com; +91 98742 85145))
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