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In: Finance, Forex

Chris Williamson, chief business economist at S&P Global, said on Friday: “April saw a two-speed euro-zone economy, the weakness of the manufacturing sector is a major concern as it points to an economy that is not firing on all cylinders.”

Economic momentum in the euro area unexpectedly picked up in April, with a rebound in services following the end of Covid restrictions making up for stalling manufacturing.

A composite gauge for both sectors jumped to a seventh-month high, according to a survey of purchasing managers published by S&P Global. The increase to 55.8 from 54.9 in March compares to an estimate of 53.9.

The improvement in services was led by an unprecedented surge in tourism and recreation activity, while manufacturers saw output growing at the slowest pace in nearly two years.

The outlook for the euro-area economy is increasingly uncertain, with Russia’s invasion of Ukraine weighing on the region’s pandemic recovery. Renewed strict lockdowns in China have exacerbated global bottlenecks, together with rising energy costs that are fanning inflation, which already is at a record high.

Prices charged for goods and services increased at an “unprecedented rate” this month, according to S&P Global, “hinting that inflation has further to rise.”

Williamson said: “The ever-rising cost of living suggests that service-sector growth could cool sharply once the initial rebound from the opening up of the economy fades.”

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