The eurozone’s business activity accelerated at its quickest rate in 21 years in July, according to a carefully monitored poll released on Friday, as the economy accelerated with looser Covid-19 regulations.

However, the study found that the expansion of the Delta variation was beginning to erode corporate confidence, with concerns that new policies could wreak havoc on the economy.

According to IHS Markit’s PMI composite index, activity increased from 59.5 in June to a healthy 60.6 in July, considerably over the 50-point barrier that indicates growth.

With summer in full swing, Chris Williamson, chief economist at IHS Markit, stated that the tourist and hospitality sectors were particularly important for propelling the economy to historic levels of growth.

Tourism has resumed as pandemic restrictions have been lifted, helping to increase Europe’s economic growth this month.
Tourism has resumed as pandemic restrictions have been lifted, helping to increase Europe’s economic growth this month. Photographer: AFP/Sameer Al-DOUMY

However, supply chain delays remained a “significant issue” for firms, affecting productivity and driving up prices.

This, he cautioned, will “feed through to greater consumer costs in the coming months” and be reflected in inflation data.

Williamson said the delta variation constituted a “significant risk to the forecast,” pointing to bleaker times ahead.

“Not only have rising case numbers caused a drop in corporate optimism to its lowest level since February, but subsequent covid waves around the world could cause more global supply chain delays and thus ever greater pricing.”