The key European economies are slowly but firmly recovering from the coronavirus-induced crisis. Germany’s and France’s business activity results prove that the governments are on the right path and the incentives created to support the economies produce the desired positive effect.
Official data shows that the German economy is doing great. In January, the services PMI hit the record unseen in four months. Business activity in the manufacturing sector improved as well. Both readings came well above the market consensus. The IHS Markit composite PMI was at 54,3 points, indicating stable growth in figures. In France, business activity data in the manufacturing sector partially offset the disappointing results in the services sector.
"Manufacturing is expected to stage a recovery in 2022 as supply bottlenecks ease, but seeing growth of this speed already is a welcome development. The drag on production from supply-chain issues looks to have eased further, although there is still a lot of room for improvement on this front," Phil Smith, Economics Associate Director at IHS Markit, said.
At the same time, inflation is growing along with business activity, which may leave the European Central Bank with no choice but to tighten monetary policy. The regulator hopes inflation will slow down throughout the year and the economic recovery, on the contrary, will accelerate as the latest Covid-19 wave subsides. In 2021, Germany’s inflation hit the 30-year high of 3.1% for the first time since 1993.
