The eurozone business activity soared in July, expanding at its fastest pace in 15 years, as the rapid rollout of COVID-19 vaccines across Europe is encouraging consumers to spend more, according to a closely watched survey released on Wednesday.

The final reading of the IHS Markit composite Purchasing Managers’ Index, or PMI, viewed by many as a good measure of economic health, climbed to 60.2 last month from June’s reading of 59.5, its highest level since June 2006 and well above the 50-mark separating growth from contraction.

“Europe’s service sector is springing back into life. Easing virus restrictions and further vaccination progress are boosting demand for a wide variety of activities, especially in the tourism, travel and hospitality sector,” Chris Williamson, chief business economist at IHS Markit, said.

Meanwhile, in its monetary policy meeting held on Thursday, the Bank of England kept Britain’s interest rates steady at the historic low of 0.1 per cent, even though it predicted a stronger recovery this year that will push inflation higher than previously expected. The central bank raised its inflation forecasts, as expected by economists, following two consecutive months of above-forecast readings.

Policymakers now predict that UK inflation would rise to four per cent by the end of this year, up from 2.5 per cent in June, largely due to higher energy and other goods prices. But they refrained from raising borrowing costs to curb rising prices, as they believe the current spike in inflation to be temporary and is expected to fall back towards the bank’s two per cent target next year.

Finally, in the US, a monthly report released on Wednesday by ADP, a payroll processor, showed that US private sector employment increased by much less than expected in July. Private sector employment increased by 330,000 jobs from June to July according to the report. Economists had expected private sector employment to soar by 695,000 jobs compared to the jump of 692,000 jobs originally reported for the previous month.

“The labour market recovery continues to exhibit uneven progress, but progress nonetheless,” ADP chief economist Nela Richardson said.

This article was prepared by Bank of Valletta plc for general information purposes only.

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