IHS Markit PMI: Eurozone economy grows at fastest rate for 15 years

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Eurozone business activity grew at the fastest rate for 15 years in June, according to the latest IHS Markit Flash Eurozone PMI.

The surge in growth unsurprisingly comes as economies relax coronavirus restrictions and vaccine progress boosts confidence.

According to IHS Markit, prices charged for goods and services rose at an unprecedented rate as demand continued to outstrip supply. Despite firms taking on extra staff at the sharpest rate for almost three years, June saw a record rise in backlogs of work, a further near-record lengthening of supply chains and the increasingly widespread depletion of warehouse inventories.

Other key observations made by IHS Markit are as follows:

  • The headline IHS Markit Eurozone Composite PMI® increased from 57.1 in May to 59.2 in June, its highest since June 2006
  • New order growth likewise accelerated to its fastest rate since June 2006
  • Business confidence rose to the highest since future sentiment data were first available in 2012
  • The manufacturing sector recorded its twelfth successive month of output growth
  • In the service sector, business activity growth accelerated to a pace not exceeded since July 2007
  • The renewed surge in demand and brightening outlook prompted firms to take on additional staff for a fifth straight month
  • Manufacturers reported a lengthening of supply chains that was only slightly less marked than the 24-year survey record seen in May
  • Average input prices rose at a rate exceeded only once (in September 2000) over the 23-year survey history

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The eurozone economy is booming at a pace not seen for 15 years as businesses report surging demand, with the upturn becoming increasingly broad-based, spreading from manufacturing to encompass more service sectors, especially consumer-facing firms.

“Virus containment measures have been eased to the lowest since last September and are set to be reduced further in July to the lowest since the pandemic began. Vaccination programmes are also making impressive progress. This has not only
facilitated greater activity in the service sector in particular, but the brightening prospect of life increasingly returning to normal has also pushed confidence to an all-time high, fueled greater spending and encouraged hiring.

“The data set the scene for an impressive expansion of GDP in the second quarter to be followed by even stronger growth in the third quarter.”

Photo credit: pixabay / Hans