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."
