LONDON—Business activity across the euro zone accelerated sharply last month as demand soared, particularly in the bloc’s dominant services industry, according to a survey mostly conducted before Russia invaded Ukraine.
As the Omicron coronavirus variant swept across Europe earlier this year, many governments reimposed restrictions. But most of those curbs have been eased.
IHS Markit’s final Composite Purchasing Managers’ Index, seen as good gauge of overall economic health, climbed to a five-month high of 55.5 in February from 52.3 in January.
However, that was below the 55.8 preliminary estimates which contained 82 percent of replies and was published on Feb. 21—before the Russian invasion.
“The survey data for February depict a euro zone economy that was regaining robust growth momentum ahead of the invasion of Ukraine,” said Chris Williamson, chief business economist at IHS Markit.
“Business activity accelerated to a pace commensurate with GDP growth in excess of 0.6 percent, buoyed by a relaxation of virus restrictions.”
As restrictions were eased consumers returned to restaurants, bars, and other services while also buying manufactured goods, so the composite new business index climbed to 55.6 from 52.7, its highest since September.
A PMI for the services industry bounced to 55.5 from 51.1, well above the 50 mark that separates growth from contraction but below an initial 55.8 estimate.
Manufacturing growth in the bloc waned slightly last month but activity was still strong and supply chain constraints eased, a sister survey showed on Tuesday, although factories and consumers faced soaring prices. [EUR/PMIM]
Services firms had to bear input costs rising at the fastest rate since the survey began in mid-1998 and increased their prices at a record pace. The output prices index rose to 58.8 from 57.9.
Inflation soared to a record high of 5.8 percent last month, official preliminary data showed on Wednesday, almost triple the European Central Bank’s 2.0 percent target.
That will likely intensify a policy dilemma for ECB policymakers when they meet next week, needing to convey a sense of calm amid war-related market turmoil but also responding to mounting price pressures.
“With inflation risks rising and growth prospects waning, the Ukraine conflict adds to business and household headwinds for the coming months, and exacerbates the difficult juggling act of the ECB in controlling inflation while sustaining a robust economic recovery,” Williamson said.