Eurozone is starting to flex its muscles after recording significant improvement across its important economic indicators.
In May, the bloc’s manufacturing activity, which accounts for more than 50% of the income on some of its leading economies, came better than expected.
During the month, the IHS Markit’s Manufacturing Purchasing Managers’ Index hit 63.1. This is a large improvement from the preceding period’s 62.9.
This is also better than the average analysts’ consensus which came at 62.8 points. Impressively, this result is the highest recorded so far in the last 23 years.
The main driver of the robust manufacturing result is the region’s biggest economy, Germany.
The country’s PMI for the month stood at a robust 64.4 points and is the fifth consecutive month of growth so far in 2021.
French PMI also made sure that it made a necessary contribution as manufacturing activity in the country rose to 59.4 points. This is the indicator’s fastest recovery so far in the last 20 years.
The European Union is currently awaiting the composite PMI result due for release later in the week. This will confirm the overall health of the economy in cross-cutting sectors, beyond factory activity.
Analysts laud the region on its stellar May performance despite weathering the risks associated with rising input costs.
For the record, surging raw material prices managed to take hold in Asia, particularly crippling outputs in China, South Korea, and Japan.
Despite managing to dodge the bullet in this sector, there were reported supply delays during the month which greatly weighed on production.
This means that along with the significant improvement in the pandemic situation, restrictions on important supply chain players continue to restrain production capacity.
Inflation Target Smashed
Unlike its counterparts, European Union is prepared to take on the rising prices all across the bloc.
To the surprise of many, the European Central Bank managed to hit above the inflation target in May after long months of playing with fire.
The actual result came at 2% last month, a sharp upgrade from the 1.6% result incurred in April.
This is also above the ECB’s original plan of having it below but close to 2% as of its latest consensus.
Such a result ignited a dichotomous response: the ones in favor noted that the economy has a better chance at growing in real terms now that the indicator faced correction.
Others noted that without proper monitoring and timely intervention, this could quickly escalate and burden citizens in the coming months.