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Staff of Reuters 3 Minutes to Read (Reuters) – LONDON, July 5 (Reuters) – According to a survey released on Monday, euro zone firms increased activity at the strongest rate in 15 years in June as additional coronavirus restrictions were eased, bringing life back to the bloc’s biggest service economy. However, the spike in growth has come at a cost, since inflationary pressures have risen as a result of labor shortages and supply chain disruptions caused by the outbreak. The final composite Purchasing Managers’ Index (PMI) from IHS Markit, which is regarded as a good indicator of economic health, increased to 59.5 in June from 57.1 in May, the highest level since June 2006. That was higher than the 59.2 “flash” estimate and well beyond the 50-point threshold that separates expansion from contraction. “Europe’s economic recovery accelerated in June, but inflationary pressures increased as well,” said Chris Williamson, IHS Markit’s chief business economist. “The service industry in the eurozone is flourishing. The PMI surveys, when combined with the excellent rise seen in the manufacturing sector, indicate that the region’s economy is running on all cylinders as summer approaches.” Governments on the continent have permitted more of the services industry to reopen as vaccination programs have accelerated, and the PMI has risen to 58.3 from 55.2, beating the flash 58.0 estimate and reaching its best level since July 2007. Manufacturers’ activity rose at its highest pace on record in June, according to a PMI reported last week, but they faced the sharpest spike in raw materials costs in well over two decades. The services industry felt the inflationary pressures as well, with the composite input prices index jumping to 69.8 from 66.8, the highest level in over 21 years. Despite the fact that inflation risks are skewed to the upside, a Reuters poll indicated last month that the European Central Bank was anticipated to keep its easy monetary policy and wait for rising inflation expectations to pass before acting. With demand increasing and anticipation for further lifting of limitations leading to a more regular way of life, excitement for the coming year has grown. The services business expectations index increased to 72.7, the highest level since August 2000. “In the meantime, a flood of confidence that the worst of the epidemic is behind us has boosted firms’ growth estimates to their greatest level in 21 years, indicating that the upturn will gain more strength in the coming months,” Williamson added. (Jonathan Cable contributed reporting, and Toby Chopra edited the piece.)/nRead More

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