German and French Services Boom, Factory Squeeze May Be Easing

Europe’s two largest economies reported a boom in service-sector activity in June as the region starts to unlock, and the first signs emerged that supply strains for manufacturers might be starting to ease.

Purchasing managers’ indexes for Germany and France showed private-sector economic activity picking up, with services growth the fastest in years.

Composite PMIJuneSurveyMay
France57.159.057.0
Germany60.457.656.2

While French manufacturing growth slowed to a four-month low as businesses were hit by worsening supply chain difficulties, German factories were able to see light at the end of the tunnel.

“Supply shortages still remain widespread” in Germany, said IHS Markit Associate Director Phil Smith. “But a fall in the number of goods producers reporting longer lead times and rising materials prices are perhaps the first signs that the worst of the disruption has now passed.”

Price pressures increased further in both countries. That’s a trend the European Central Bank is watching carefully as it judges the future of its monetary stimulus. Input prices for services in Germany rose at the fastest pace since IHS Markit started collecting the data.

The European PMIs contrasted with Japan, where a similar survey showed private-sector activity contracting, led by services. Some business restrictions remain in place to prevent flareups of the virus in the nation as it prepares for the Tokyo summer Olympics next month.

©2021 Bloomberg L.P.

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