Eurozone Sees Strong Growth in March as Inflation Surges: S&P Global

European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium, on July 14, 2021. Yves Herman/Reuters

The eurozone region maintained a “strong rate of growth” in March 2022, dropping only slightly from February’s five-month high despite a record surge in inflation, ratings agency S&P Global said in a recent report.

The seasonally adjusted S&P Global Eurozone PMI Composite Output Index in March 2022 was recorded at 54.9, slightly lower than 55.5 in February, indicating strong business activity across the eurozone.

“The expansion was driven by the service sector, where output rose at a marginally faster pace than in February. Manufacturing production was also up over the month, although the expansion was the weakest seen over the current 21-month sequence of increases,” the report (pdf) stated.

“The upturn was supported by a further loosening of COVID-19 containment measures, which led to higher activity levels at clients and boosted demand for goods and services.”

The fastest growing eurozone nation in March was Ireland, with its PMI composite index hitting a five-month high. France came in second, followed by Germany, Spain, and Italy.

New export orders in the region fell for the first time since November 2020, negatively affecting the overall inflows of new work. The war in Ukraine, supply chain issues, and inflationary pressures weighed on the demand for goods, the report said.

Both input costs and output prices rose in March 2022 as businesses began transferring at least a part of the rising operating costs to their customers.

“To combat margin pressures, prices charged for eurozone goods and services were raised to the quickest extent on record,” the report said.

Eurozone inflation rose to 7.5 percent in March, an all-time high in the region, Politico reported. The rate of inflation is more than triple the European Central Bank’s target of 2 percent. In the European Commission’s economic forecast report released in February 2022, Europe was predicted to see slower growth for the next two years due to inflation, among other causes.

On a positive note, employment levels across the eurozone continued to increase in March, the S&P Global report said, and the rate of job growth accelerated to a four-month high.

The S&P Global Eurozone PMI Services Business Activity Index rose fractionally from 55.5 in February to 55.6 in March, indicating that the services sector output remained strong. This was the quickest rate of growth in the sector in four months.

Speaking about the composite PMI data, Chris Williamson, chief business economist at S&P Global, stated in the report that the further reopening of the eurozone economy amidst the “fading Omicron wave” had a positive effect on business activity in March.

“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, as well as worsening supply chain issues arising from the war and a marked deterioration in business optimism regarding prospects for the year ahead,” he added.