LONDON (Reuters) – Eurozone businesses grew their business at the fastest pace in 15 years in June, as the easing of new coronavirus restrictions brought the bloc’s dominant service industry back to life, an investigation revealed Monday.
But this growth spurt has come at a cost, as inflationary pressures have increased due to labor shortages and supply chain disruptions caused by the pandemic.
The IHS Markit Final Composite Purchasing Managers Index (PMI), considered a good indicator of economic health, jumped to 59.5 last month from 57.1 in May, its highest level since June 2006.
This was ahead of the “flash” estimate of 59.2 and well above the 50 mark separating growth from contraction.
“The index was at its highest for 15 years, confirming that the recovery of the bloc’s economy is well underway. At the same time, arrears and pressure on producer prices show no signs of abating, ”said Mateusz Urban of Oxford Economics.
“The services PMI sub-index posted an increase. This indicates that the sector has benefited from the easing of restrictions and increased consumer optimism thanks to the progress of the vaccination campaign.
An acceleration of immunization programs on the continent has allowed governments to reopen more of the service sector and the sector’s PMI has reached its highest level since July 2007.
Activity in the service sector in Germany grew in June at its fastest pace since March 2011, while in France the sector exploded following the easing of restrictions related to COVID-19. [ZRN002C4B]
Meanwhile, in Britain – outside the eurozone and the European Union – the post-foreclosure rebound for service companies eased only slightly in June, but pricing pressures increased most heavily ever recorded. [GB/PMIS]
Global stocks held on to record highs on Monday, as concerns over the Delta variant of COVID-19 offset positive sentiment over the surge in euro area trade activity. [MKTS/GLOB]
THE PRICE INCREASES
A PMI covering eurozone manufacturers, released last week, showed factory activity grew at its fastest pace on record in June, but faced the biggest increase in costs for manufacturers. raw materials for more than two decades.
These inflationary pressures were also felt by the service sector and the composite input price index rebounded to its highest level in almost 21 years.
Although inflation risks are skewed upward, the European Central Bank had to keep monetary policy loose and examine higher inflation expectations for some time before acting, a Reuters poll found last month. [ECILT/EU]
With increasing demand and the hope of further easing restrictions leading to a more normal lifestyle, optimism about the coming year has improved. The service business expectations index rose from 71.2 to 72.7, its highest since August 2000.
Eurozone investor morale rose for the fifth consecutive month in July, its highest level since February 2018, supported by the reopening of restaurants and retailers as well as tourism as coronavirus cases plummet, revealed Monday another survey.
Reporting by Jonathan Cable; Editing by Toby Chopra