European Business Activity Expands At Fastest Pace In Two Decades

European business activity expanded at its fastest monthly pace in more than two decades in July as the loosening of COVID-19 restrictions gave a boost to the services industry.

IHS Markit's Flash Composite Purchasing Managers' Index, viewed as a guide to economic health, climbed to 60.6 in July from 59.5, its highest reading since July 2000.

The July result was ahead of the 50-mark separating growth from contraction and ahead of a Reuters poll that had estimated a growth reading of 60.0.

A strong recovery in Germany, Europe's biggest economy, continued with its Purchasing Managers Index hitting the highest level in nearly a quarter of a century, fueled by strong demand and an easing of pandemic containment measures.

French business activity weakened more than forecast and fell to a three-month low as shortages of materials and transportation delayed impacted firms.

In England, which is now outside the European economic zone, the rapid economic bounce-back from the pandemic slowed as a new wave of COVID-19 cases forced hundreds of thousands of workers to self-isolate under government rules to limit the spread of the disease.

Still, European factories had another blistering month in July. The manufacturing PMI only dipped from June's record high of 63.4 to 62.6.

The European Central Bank (ECB) pledged earlier this week to keep interest rates at record lows for even longer to boost sluggish inflation. The central bank forecasts inflation in the Euro zone to hit 1.9% this year before falling back to 1.5% in 2022 and 1.4% in 2023, well below its 2% target.