Euro Area: Business activity growth accelerates in April

Euro Area PMI April 2022

Euro Area: Business activity growth accelerates in April

The flash Eurozone Composite Purchasing Managers’ Index (PMI), produced by S&P Global, rose to 55.8 in April from 54.9 in March. Therefore, the index moved further above the 50 no-change threshold, signaling a stronger improvement in business conditions.

April’s increase was led by an acceleration in services sector activity, which came as restrictions were loosened to an extent not seen since the onset of the pandemic according to S&P Global’s Covid-19 Containment Index. This more than offset a slowdown in the manufacturing sector. Business expectations strengthened from March’s 17-month low. However, they remained weighed down by the war in Ukraine, especially in the manufacturing sector. On the price front, input costs increased at the second-fastest rate on record, leading output charges to soar at a record pace amid surging commodity prices and snarled supply chains.

Assessing the Eurozone’s two largest economies, growth in business activity strengthened in France while it softened in Germany, dragged down by falling manufacturing output.

Commenting on the release, Bert Colijn, senior economist at ING, stated:

“The eurozone economy continues to face challenges ahead. Prolonged high inflation will start to weigh more on household consumption over time with weaker demand for goods spilling over into services demand when catch-up demand fades. Also, investment will be weighed down by higher interest rates and weakening credit conditions in the coming months. Supply chain problems are already an issue now and are set to remain problematic given the build-up of containers in Shanghai and continued disruptions related to the war.”

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