Our outlook remains that the global economy will pick up speed in the second half of 2021, as the headwinds from the pandemic subside and activity in the services sector returns to normal, aided by a recovery across Europe that complements the growth surge in the U.S.

However, the latest PMI surveys pose a challenge to the outlook. After falling nearly 2 points in June, the July global all-industry PMI fell nearly one point from its all-time high in May. At 55.7, the all-industry manufacturing PMI still points to a robust annualized growth rate of 4.0% in global GDP.

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

The decline in the PMIs reflects unexpected drops in the services and manufacturing output indices.The global manufacturing output PMI fell last month and has now dropped 1.4 points from its expansionary peak in April. Signs of bottleneck pressures in manufacturing output are clear, as delivery times have surged to their highest levels in more than a decade, while inventories continue to fall and price pressures remain intense. However, the most surprising aspect of this month’s report is the sharp 1.2-point drop in the global services sector’s output PMI, which now stands nearly 3 points below its decade-high in May.

The loss of momentum in the all-industry production PMI is reflected in signs of a slight slowdown in demand. It is clear that supply constraints continue to weigh on manufacturing. However, the new orders PMI fell for both manufacturing and services for the second consecutive month, while a further decline in the overall employment PMI serves as a warning that bottlenecks could amplify real-economy spillover effects if they begin to slow the pace of post-pandemic rehiring.

Finally, it is encouraging to see that the PMI for the consumer services sector continues to show strong momentum. Forglobal growth to pick up in the coming months, a recovery in consumer services from current low levels is key, and the latest PMIs are consistent with this.