Our scenario continues to be for the global economy to accelerate in 2H21, as the headwinds from the pandemic fade and service sector activity normalizes, helped by an awakening across Europe joining the growth boom in the US.

Now, the latest PMI surveys pose a challenge to the outlook. After falling nearly 2 points in June, July's global all-industry PMI retreated nearly a point from its all-time high in May. At 55.7, the all-industry production PMI still points to a robust 4.0% annualized pace of growth in global GDP.

Regional variation in PMIs is highlighted in this month's report, with the Eurozone PMI rising in July (mainly thanks to strong gains in Germany) and strong gains in China and India more than offset by declines in the U.S., U.K., Australia and Russia.

The pullback in the PMIs reflects unexpected declines in the services and manufacturing output indexes. The global manufacturing PMI posted a decline last month and is now down 1.4 points from its expansionary peak in April. Signs of bottleneck pressures in manufacturing output are clear, as lead times have soared to their highest levels in more than a decade, while inventories continue to fall and price pressures remain intense. Most striking in this month's report, however, is the large 1.2 point drop in the overall services sector output PMI, which is now almost 3 points below its decade high in May.

The loss of momentum in the industry-wide production PMI is reflected in signs of some slowdown in demand. Clearly, supply constraints continue to weigh on manufacturing. However, the new orders PMI fell for both manufacturing and services for the second month in a row, while a further drop in the overall employment PMI sends a cautionary note that bottlenecks could amplify real spillovers if they begin to slow the pace of post-pandemic rehiring.

Finally, it is encouraging to see the consumer services PMI maintaining momentum at an elevated level. A recovery in consumer services from a depressed level is key for global growth to pick up in the coming months and the latest PMIs are consistent with this.