The PMI readings today disappointed to the downside

A moderation of growth momentum was always to be expected after the reopening and as pent-up demand after the summer wanes. However, the outlook is less than certain for Europe as we look towards Q4 with conditions easing further in September.

The key thing that stands out from the reports above is that supply bottlenecks are continuing to weigh on manufacturing output heavily (most pressing concern for Germany) and high cost/inflation pressures are still ever present at the end of Q3.

While cost pressures eased slightly in Germany, they are seen rising again in France - suggesting that the trend is likely to keep up at least during Q4 as well.

The fear moving forward is that high cost/inflation pressures and supply chain disruptions will continue to pose significant headwinds for the euro area economy as the year winds down, dampening any optimistic prospects to the outlook.

In turn, that will continue to test the ECB's resolve in maintaining that inflation is 'transitory' and will step up pressure in upsizing APP purchases come next year.