Business activity in the Eurozone expanded at its fastest rate for 15 years in June, driven by strong performances by the manufacturing and service sectors.
The latest IHS Markit Composite Output Index for the Eurozone rose to 59.5 in June, up from 57.1 in May.
The reading was the highest since June 2006 and marked the fourth successive month the index has topped 50. The figures were revised up from their flash index reading of 59.2.
Ireland registered the fastest rate of growth of all Eurozone countries. A reading above 50 indicates businesses reported growing activity levels.
Higher manufacturing output contributed to the strong levels of business activity, driven by export demand rising as the global economy reopens. This was supported by the Eurozone’s services sector reporting its fastest pace of growth since 2007.
Chris Williamson, chief business economist at IHS Markit, says: “Europe’s economic recovery stepped up a gear in June, but inflationary pressures have also ratcheted higher.”
“Business is booming in the eurozone’s service sector, with output growing at a rate unsurpassed
over the past 15 years. Added to the impressive growth seen in the manufacturing sector, the PMI surveys suggest the region’s economy is firing on all cylinders as it heads into the summer.”
Firms were put under intense pressure to cope with surging rates of new business and to clear swelling backlogs of work in June.
Businesses responded to robust demand by scaling staffing levels for the fifth successive month at the fastest rate of expansion since the start of 2018.
Fears that inflation may prove much sticker than experts have forecast are starting to gather momentum. Operating expenses rose in June at a historically elevated rate, with inflation hitting its strongest level for over two decades.
“Firms are increasingly struggling to meet surging demand, however, in part due to labour supply shortages, meaning greater pricing power and underscoring how the recent rise in inflationary pressures is by no means confined to the manufacturing sector” Williamson added.
Service sector companies are hiking their prices at the steepest pace for over 20 years as costs spike higher, accompanying a similar jump in manufacturing prices to signal a broad-based increase in inflationary pressures.”
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