Globally, the all-industry PMI retreated one step from May's all-time high, with declines in the services and manufacturing output indexes. At 56.6, the all-industry production PMI is consistent with 4% ar growth in global GDP.

While the drop in the manufacturing PMI is consistent with ongoing bottleneck pressures in the goods sector, the pullback in services is more surprising given the assumption that this sector will open up quickly during the middle quarters of the year. The loss of momentum in the June all-industry production PMI is reflected in signs of some slowdown in demand.

Despite the June misstep, the PMI level remains extremely elevated and still points to strong gains in activity. The same can be said for the components of new orders. Moving forward, the recovery is expected to accelerate in 2H21 as the headwinds from the pandemic fade and service sector activity normalizes, helped by an awakening across Europe that joins continued booming growth in the US.

Better days are still ahead... Future output indices for both manufacturing and services rose from already high levels and support the view that the June setback is a temporary respite rather than a sign of a loss of underlying momentum.

Growth where it is most needed... The drop in June PMIs is largely due to declines in the US (from record highs and down to a still elevated level) and China. In contrast, all signs continue to point to a European boom. The Eurozone's all-sector PMI added to its strong May gain and came in just below its all-time high. At the same time, the UK all-industry PMI dipped, but remained extremely elevated above 60.

...and in the sectors where it is most needed. The recovery has been characterized by an outsized full recovery in the goods sector that has been more than offset by a still depressed services sector, particularly for consumer-related services such as travel, entertainment and restaurants. It is therefore encouraging that the pullback in the overall services PMI is largely due to a sharp drop in financial services. In contrast, the consumer services PMI, which rose in May, rose further in June.