The IHS Markit Eurozone PMI® Composite Output Index recorded 57.1 in May – up from 53.8 in April thanks to a resurgent services economy that helped to drive private sector growth.
May’s PMI was the third successive month of growth, but more significantly – the best recorded since February 2018.
The services sector saw significant growth as lockdowns subsided, and although manufacturing grew slower than the last two months, remains on an upward trajectory.
Other key observations made by IHS Markit are as follows:
- Ireland’s growth here reached its highest level in just over 21 years of data collection
- Spain also performed strongly, registering its best performance in fourteen-and-a-half years, whilst growth in France hit a ten-month high
- private sector new work rose to the strongest degree since June 2006
- New export business rose for a sixth successive month
- The net rise in employment was the sharpest recorded by the survey in over two-and-a-half years, with growth led by Germany and Ireland
- Confidence in the outlook also improved during May, hitting its highest level since comparable data were first available in mid-2012
Commenting on the latest PMI, Chris Williamson, Chief Business Economist at IHS Markit said:
“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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