Eurozone business growth skids but remains strong

Eurozone’s business activity stepped lower in May but remained strong despite the headwinds associated with lower consumer spending and shortage of raw materials.

S&P Global’s flash composite purchasing managers’ index skidded to 54.90, lower than the market consensus of 55.30. It also came in below the 55.80 report a month earlier, hitting the smallest expansion since November 2020.

Likewise, the services sector declined to 54.90, missing the expected 55.30. It also weakened from the previous 57.70 as sharp rising prices kept some consumers cautious.

However, the latest reading marked the second-strongest rise in the past eight months. The services industry benefited from the rising demand due to the reopening of the economy amid the easing of Omicron related restrictions.

Correspondingly, tourism and recreational activities in the Eurozone significantly ticked higher.

Similarly, manufacturing growth eased to 54.40, lower than the average analysts estimate of 54.90. The indicator also tumbled from the prior 55.50 result as widespread supply shortages continued to hamper Eurozone’s output.

Moreover, the persisting Russia-Ukraine war and China’s lockdowns exacerbated the existing pandemic-related supply chain pressures.

Nevertheless, the latest readings still went above the 50.00 mark, indicating modest growth in the Eurozone.

Eurozone’s business activity

In Germany, the Eurozone’s largest economy, the sustained rebound in services helped business activity grow. Regardless, there are still signs of rising prices, market uncertainty and supply problems to put pressure on demand.

In France, the bloc’s second biggest economy, businesses grew slightly. Accordingly, inflationary pressures took the shine off a reduction in COVID-19 restrictions.

Eventually, the Eurozone’s manufacturing input and output prices both remained high. Then, factory managers passed on the mounting costs of materials to customers.

Meanwhile, outside the Eurozone, Britain’s economy dwindled more than expected this month. In addition, recession worries rocketed higher amid the red-hot consumer prices.