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Euro zone business growth got a boost last month from the re-opening of economies following the Omicron coronavirus variant, according to a new survey.

But the survey also showed that soaring energy costs and Russia’s invasion of Ukraine threaten the recovery.

S&P Global’s final composite Purchasing Managers’ Index (PMI), seen as a good guide to economic health, dipped to 54.9 in March from February’s 55.5 but was ahead of a preliminary 54.5 estimate.

“The further reopening of the euro zone economy amid the fading Omicron wave has provided a welcome tailwind to business activity in March, helping drive a further solid expansion from the slowdown seen at the start of the year,” said Chris Williamson, chief business economist at S&P Global.

“However, the resilience of the economy will be tested in the coming months by headwinds which include a further spike in energy costs and other commodity prices due to Russia’s invasion of Ukraine,” he added.

A PMI covering the bloc’s dominant services industry nudged up to 55.6 from 55.5, beating the 54.8 flash estimate.

But the rate of growth in overall demand fell and export orders, which include orders made between member nations, declined as firms jacked up their prices to compensate for a record increase in input costs.

Inflation in the currency union was a record high of 7.5% in March, official data showed last week.

As the services output prices PMI at 62.6 – the highest since the survey began in mid-1998 – inflation is likely to rise further.

That adds pressure on the European Central Bank to rein in runaway prices, even though growth is likely to slow sharply.

The intensifying cost of living crisis, alongside renewed supply chain bottlenecks following Russia’s invasion, put a big dent in optimism. The composite future output index slumped to 59.1 from 68.9, its lowest since October 2020.

Article Source – Euro xone got March boost from reopening but prices soared – PMI – RTE

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