Eurozone businesses expanded activity at the fastest rate in 15 years in June as the easing of more COVID-19 restrictions brought life back to the bloc’s dominant service industry, a survey showed on Monday, according to Reuters.
The surge in growth had come at a cost as inflationary pressures mounted due to labour shortages and disruptions to supply chains caused by the pandemic.
IHS Markit’s final composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, jumped to 59.5 last month from May’s 57.1, its highest level since June 2006. That was ahead of the 59.2 “flash” estimate and well above the 50 mark separating growth from contraction.
“Europe’s economic recovery stepped up a gear in June, but inflationary pressures have also ratcheted higher,” said Chief business economist at IHS Markit, Chris Williamson.
The PMI surveys suggest the region’s economy is firing on all cylinders as it heads into the summer.
An acceleration in vaccination programmes on the continent has created governments to allowed more of the services industry to re-open. The PMI soared to 58.3 from 55.2, ahead of the flash 58.0 estimate and its highest reading since July 2007.
A PMI covering manufacturers, released last week, showed factory activity expanded at its fastest pace on record in June but that they faced the steepest rise in raw materials costs in well over two decades.
Those inflationary pressures were also felt by the services industry and the composite input prices index bounced to 69.8 from 66.8, the highest in nearly 21 years.
Although inflation risks are skewed to the upside, the European Central Bank was expected to maintain its loose monetary policy and look through higher inflation expectations for a while before it acts, a Reuters poll found last month.
With demand surging, and amid hopes of further easing of restrictions leading to a more normal way of life, optimism about the coming year improved. The services business expectations index climbed to 72.7 from 71.2, its highest since August 2000.