Eurozone business activity grows at fastest pace in more than 3 years

IHS Markit’s flash composite eurozone purchasing managers’ index - which measures activity in the manufacturing and services sectors - rose to 56.9 from 53.8 in April. This marked the highest reading since February 2018 and was the third successive month of output growth. It was also above expectations for a reading of 55.1.

The PMI for the services industry increased to 55.1 in May from 50.5 the month before while the flash manufacturing PMI came in at 62.8 from 62.9 in April. Analysts had been expecting readings of 52.3 and 62.5, respectively.

Chris Williamson, chief business economist at IHS Markit, said: "Demand for goods and services is surging at the sharpest rate for 15 years across the eurozone as the region continues to reopen from covid-related restrictions.

"Virus containment measures have been eased in May to the lowest since last October, facilitating an especially marked improvement in service sector business activity, which has been accompanied by yet another near-record expansion of manufacturing.

"Growth would have been even stronger had it not been for record supply chain delays and difficulties restarting businesses quickly enough to meet demand, especially in terms of re-hiring."

Capital Economics said: "All told, today’s data suggest that the eurozone economy is continuing to recover as restrictions are eased and point to decent GDP growth in Q2.

"But persistent supply-chain difficulties are limiting manufacturing activity and causing price pressures to build, albeit only temporarily. A sustained rise in underlying inflation is not on the cards."