The recovery of the Spanish and Italian services sectors continues, but Delta’s concerns are growing | World Weekly

The recovery of the Spanish and Italian services sectors continues, but Delta’s concerns are growing

 | World Weekly


Eurozone Economy Updates

Activity in the service sectors in Spain and Italy grew strongly last month as Covid-19 restrictions eased, according to a widely monitored business survey, but the spread of the coronavirus delta variable caused confidence to erode over the outlook for the coming months.

IHS Markit’s Italian services sector PMI reached 58.0 in July, up from 56.7 in June to its highest level since 2007. A score above 50 indicates that the majority of companies reported an expansion in activity from the previous month.

The easing of coronavirus restrictions and the return of international travel have boosted demand.

The pace of growth in Spanish services remained strong but eased on a monthly basis with the PMI dropping to 61.9, from 62.5 in June, the highest level since 2000.

The companies said the emergence of the delta variable had hurt foreign demand for Spanish services, raising concerns about future activity, particularly in the hospitality sector. Confidence fell to its lowest level in four months.

“Companies have indicated concerns that any further increase in infection numbers could affect the recovery,” said Paul Smith, director of economics at IHS Markit.

Spain’s tourism sector is particularly dependent on countries that have recently seen an increase in Covid cases, such as the United Kingdom.

“The indicators so far show very little impact of the delta variable on the economy, but they represent a significant risk to the outlook,” said Nicholas Noble, an economist at Oxford Economics.

The data came just days after business surveys indicated a slowing pace of expansion in the Spanish and Italian manufacturing sectors as commodity producers struggled with supply constraints and material shortages.

The Spanish manufacturing PMI came to 59 in July, down from 60.4 in June. Figures published on Monday showed that Italy was 60.3 in July, down from 62.2 the previous month.

The surveys found that Spanish and Italian companies in the service and manufacturing sectors were forced to raise prices in response to persistent inflationary pressures linked to supply chain disruptions.

Eurozone inflation rose to 2.2 percent in July, up from 1.9 percent in June and the highest level since October 2018.

But economists said the pressures are temporary and inflation in Spain and Italy will return to pre-pandemic levels by next year.

“[Europe] Somewhat behind the US in terms of reopening so we are seeing a subsequent spurt of economic growth. We expect it to settle down a bit [the fourth quarter] “Because some of the effects of reopening are fading away,” said Bert Cullen, an economist at ING Bank.

The eurozone economy is recovering from the historic recession caused by the pandemic, posting faster-than-expected quarterly growth of 2 percent in the three months to June, according to gross domestic product data released last week.



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