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What's going on?
New survey data out on Monday showed eurozone business activity hit a five-month high in February.
What does this mean?
These surveys ask Europe’s business managers how busy they’ve been each month, and the first one of this year – which came hot on the heels of the post-Omicron panic in January – was a bracing read. But February’s data suggests that any dropoff in activity was just a temporary setback. Business activity in the services industry, after all, rebounded as Europeans went straight back to their favorite theaters, bars, and tourist traps. And activity in the manufacturing industry suggests that supply chain bottlenecks are finally loosening up, which means those companies are finally able to start closing the gap on demand.
Why should I care?
For markets: Will Europe change its tune?
These companies also admitted to what we already knew: that they’re passing costs from steeper wages or higher energy bills onto their customers. In fact, the average price that companies are charging for their products or services jumped by the most since the survey started (tweet this). Those higher consumer prices could play a part in sending European inflation to another record high this month, which could – some traders are betting – force the European Central Bank to raise interest rates sooner than planned.
Zooming out: Britain is the litmus test.
British companies have been busy too, with a UK survey showing business activity hitting an eight-month high in February. The government is now feeling so confident, in fact, that it’s ready to shrug off every last Covid restriction: mask-wearing, testing, self-isolating – you name it. So all eyes will now be on the country to see whether it really can live alongside the virus, or whether it’ll come to regret its typically stiff upper lip.
Originally posted as part of the Finimize daily email.
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