MNI US Open: Europe PMIs Show Strong Growth...And Inflation

EXECUTIVE SUMMARY:

• EUROZONE JUNE FLASH COMPOSITE PMI HIGHEST IN 15 YEARS; U.K. SERVICES DISAPPOINT
• EUROPEAN PMIS SHOW SIGNIFICANT PRIVATE SECTOR PRICE PRESSURES
• ECB'S DE GUINDOS SAYS HE EXPECTS "VERY SIGNIFICANT" 2H GROWTH
• MNI BANK OF ENGLAND MEETING PREVIEW: ENCOURAGING DATA; MORE UNCERTAINTY

Fig. 1: European PMIs Continue To Rise On Re-Openings

Source: IHS Markit, MNI

NEWS:

EUROZONE PMI: Eurozone composite flash PMI came in at 59.2 in June, the highest in 180 months (i.e. 15 years), vs 57.1 prior.

• Services posted a 41-month high of 58.0 (vs 55.2 prior, and in line w expectations), while manufacturing was unchanged at 63.1 (just above 62.3 expected).
• The IHS Markit report notes re-opening dynamics, which include stronger price pressures: "the economy re-opened further from virus-fighting restrictions and vaccine progress boosted confidence. Prices charged for goods and services rose at an unprecedented rate, however, as demand continued to outstrip supply. Despite firms taking on extra staff at the sharpest rate for almost three years, June saw a record rise in backlogs of work, a further near-record lengthening of supply chains and the increasingly widespread depletion of warehouse inventories."

GERMAN PMI: German flash PMIs impressed in June amid re-opening, hitting best levels in a decade. Services came in at 58.1 (vs 55.7 forecast, 52.8 prior), with manufacturing at 64.9 (vs 63.0 forecast, 64.4 prior).

• The IHS Markit report noted strong demand, but additionally mounting price pressures:
• "A further easing of COVID-19 restrictions and release of pent-up demand leading to a sharp and accelerated rise in business activity...However, the recovery in output levels was accompanied by a further increase in price pressures, with rates of inflation in both input costs and output prices accelerating to new record highs."
• New orders (composite) were the strongest since Jan 2011; job creation hit the highest levels in the history of the subcomponent in the survey (to Jan 1998).

UK PMI: From the June UK PMI report: 'Companies responded to rising workloads by taking on extra staff at an unprecedented rate at the end of the second quarter. Also hitting previously unsurpassed levels, however, were rates of inflation of input costs and output prices as supply-chain disruption fuelled price pressures.'

MNI MARKETS B.O.E. PREVIEW: We think it is unlikely, but the most significant event for the market at the June meeting, would be if another MPC member joined Haldane in voting for a reduction to the QE target. For our full preview including summaries of over 20 sell side summaries see here: https://marketnews.com/mni-boe-preview-june-2021-e...

ECB (BBG): "In the second quarter of the year as well as in the second half of the year, we expect very significant growth in the euro-area," European Central Bank Vice President Luis de Guindos says in online event.Services sector is expanding as economies reopen, closing the gap with manufacturingSays higher inflation rates are result of temporary factors.

E.U. (RTRS): The European Commission will take action against Hungary's LGBT draft law, the head of the EU's executive said on Wednesday, calling the bill a shame and violation of fundamental EU values. "The Hungarian bill is a shame," European Commission chief Ursula von der Leyen said, stressing the EU would not compromise on principles such as human dignity, equality and the respect for human rights."I have instructed my responsible commissioners to write to the Hungarian authorities expressing our legal concerns before the bill enters into force."

GERMANY (BBG): Chancellor Angela Merkel's cabinet approved plans to increase borrowing by 99.7 billion euros ($119 billion) next year to help finance Germany's response to the coronavirus pandemic.The projected net debt would take the total for this year and next to more than 340 billion euros. Merkel's ruling coalition of her conservatives and Finance Minister Olaf Scholz's Social Democrats have spent freely to offset lingering damage to Europe's biggest economy.

BANK OF THAILAND (BBG): Thailand's central bank kept its benchmark interest rate unchanged and lowered its economic growth forecast for this year and next as the country grapples with its biggest wave of Covid cases yet.The Bank of Thailand held the policy rate at a record low of 0.5% Wednesday for a ninth straight meeting in a unanimous decision, as expected by all 25 economists in a Bloomberg survey.

HONG KONG: Hong Kong's pro-democracy tabloid Apple Daily said it will print its last edition on Thursday, after a tumultuous year in which it was raided by police and its tycoon owner and other staff were arrested under a new national security law. The end of the popular 26-year-old tabloid, which mixes pro-democracy discourse with racy celebrity gossip and investigations of those in power, has escalated alarm over media freedom and other rights in the Chinese-ruled city. The paper's newsroom was raided by 200 police in August last year when owner and staunch Beijing critic Jimmy Lai was arrested on suspicion of colluding with foreign forces, and again by 500 police last week when five other executives were detained.

IRAN (RTRS): PTV, a breaking news Twitter account linked to Iran's English language Press TV, said on Wednesday a sabotage attempt on a building of the Iranian atomic energy organization had been foiled.The was no confirmation of the report from the Iranian authorities.Iran has accused Israel of several attacks on facilities linked to its nuclear program and killing its nuclear scientists over the past years. Israel has neither denied nor confirmed the allegations.

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