The global economy is expected to surge over the coming months as Europe begins to catch up with the U.S. and China, but the rapid spread of the Delta variant of Covid-19 could hold back—but not derail—the recovery.
Surveys of businesses from across Europe released Friday recorded the strongest increase in activity for more than two decades. That suggests the continent is set for the kind of growth already being experienced by the U.S.
But there are clouds on the horizon, with setbacks in Australia, India and other parts of Asia serving as a reminder that the pace of global economic recovery still depends on the course of the pandemic, and can be slowed by surges in infections as new variants emerge.
“The survey also highlights how the Delta variant poses a major risk to the outlook,” said Chris Williamson, chief business economist at IHS Markit , the data firm that compiles the surveys. “Not only have rising case numbers led to a slide in business optimism to the lowest since February, further Covid waves around the world could lead to further global supply-chain delays.”
IHS Markit said its composite Purchasing Managers Index for the eurozone—a measure of activity in the manufacturing and services sectors—rose to 60.6 in July from 59.5 in June, reaching its highest level in 21 years. A reading above 50.0 points to an increase in activity.
