Eurozone economy booms as virus restrictions recede

According to a survey published on Friday, business activity in the eurozone is growing at its fastest rate in three years, as Europe's economy steadily reopens after months of Covid-19 restrictions.

Eurozone business activity is growing at its fastest rate in three years as Europe's economy steadily reopens after months of Covid-19 restrictions. Yann Schreiber AFP/File

The closely-watched study compiled by economic data group IHS Markit indicated that the jump in demand was even overwhelming the economy, with factories and businesses unable to keep up with record demands.

According to the data, "order inflows surged to an extent not seen for almost 15 years", the report said. 

The firm's PMI index, one of the earliest indicators for where the economy is heading, said activity rose from 53.8 in April to a strong 56.9 in May, above the 50-point level that indicates growth.

The #eurozone saw a revival in demand during May, as flash numbers signalled the quickest rise in new business for 15 years. Headline output index at 39-month high of 56.9 (April: 53.8), while business optimism also hit a new record. Read more: https://t.co/ULbfK2Mo3T pic.twitter.com/VAgZr2OsRI

— IHS Markit PMI™ (@IHSMarkitPMI) May 21, 2021

Growth would have been "even stronger" had it not been for supply chain delays and difficulties restarting businesses quickly enough to meet demand.

Among the countries, IHS Markit said France, where the pandemic downturn was deep, grew "especially sharply".

Germany also saw strong output, although "the manufacturing sector saw growth slow from the recent record pace of expansion thanks to supply chain bottlenecks," it said.

The struggle to meet the frenetic demand will have an effect on prices, the survey showed.

How long these inflationary pressures will persist will, however, depend on how quickly supply comes back into line with demand.

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France calls on EU to shore-up recovery investment

Meanwhile, French Finance Minister Bruno Le Maire has urged his EU partners to gear up for a second round of economic stimulus packages to ensure Europe doesn't lose ground to the US and China.

🇪🇺🇫🇷 | Déclaration à la presse de @BrunoLeMaire à son arrivée à la réunion de l'#Eurogroupe (en anglais) ⤵️ @Economie_Gouv @francediplo_EN pic.twitter.com/SU9wZAr9ts

— La France dans l'UE (@RPFranceUE) May 21, 2021

France is seeking an as yet unspecified investment plan to follow the €720 billion spending boost agreed by EU leaders last year that has been hailed as a landmark of European unity.

France, the eurozone's second biggest economy after Germany, is understood to want to set up public investment schemes to boost innovation in key sectors, especially in high tech and the fight against climate change.