December 6, 2022

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Eurozone May final services PMI 55.2 vs 55.1 prelim

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Latest data released by Eurostat – 3 June 2021

  • Composite PMI 57.1 vs 56.9 prelim
The preliminary report can be found here. The composite index is the highest since February 2018 and this reaffirms a strong May month for the euro area as looser virus restrictions bolstered demand conditions and new businesses.

Employment conditions were also seen improving for a fourth month so that is encouraging but cost inflation remains a problem that is likely to persist further in the months ahead. Markit notes that:

“The eurozone’s vast service sector sprang back
into life in May, commencing a solid recovery that
looks likely to be sustained throughout the summer.

“Businesses reported the strongest surge in
demand since the start of 2018 as covid restrictions
were eased and vaccine progress boosted
confidence.

“After covid fighting measures were tightened to the
harshest for a year in April, restrictions eased
considerably in May on average. These measures
are on course to moderate further at least until the
autumn, assuming further significant covid waves
are avoided. This should facilitate the further return
to more normal business conditions as the summer
proceeds. Business optimism for the year ahead
has consequently hit the highest for over 17 years.

“The service sector revival accompanies a booming
manufacturing sector, meaning GDP should rise
strongly in the second quarter. With a survey record
build-up of work-in-hand to be followed by the
further loosening of covid restrictions in the coming
months, growth is likely to be even more impressive
in the third quarter.

“A growing area of concern is capacity constraints,
both in terms of supplier shortages and difficulties
taking on new staff to meet the recent surge in
demand. This is leading to a spike in price
pressures, which should ease as supply conditions
improve, but may remain an area of concern for
some months, especially if labour shortages feed
through to higher wages.”

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