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By Jonathan Cable
LONDON, Oct. 5 (Reuters) – Business growth in Europe remained strong last month, but high inflationary pressures dampened demand while ongoing supply issues limited activity, issues that are expected to continue , according to a survey on Tuesday.
Although many restrictions imposed to contain the coronavirus pandemic have now been lifted in the region, businesses are suffering from shortages of personnel, raw materials and transport.
HIS Markit’s Final Composite Purchasing Managers Index (PMI), considered a good indicator of economic health, fell to 56.2 last month from 59.0 in August, although it remains well below. above the 50 mark separating growth from contraction and just above a “flash” estimate of 56.1.
A eurozone manufacturing PMI on Friday showed growth remained robust in September, but activity suffered from supply chain bottlenecks, and the bloc’s dominant service industry also saw its pace of expansion slow down.
A PMI for the services sector fell to 56.4 from 59.0, its lowest since May, while the new business index fell to 55.3 from 57.9.
“Today’s data confirms that the service sector remains on the path to recovery, but the pace of expansion has slowed. Although momentum remains strong, inflationary pressures and turmoil on the side of the the offer weighs on the outlook, “said Maddalena Martini of Oxford Economics.
“Looking ahead, we expect these downside risks to persist towards the end of 2021.”
Demand fell to its lowest level in five months as companies passed some of the rising input costs, which rose at a record pace, to consumers. The composite producer price index fell from 58.3 to 59.1, not far from survey highs set over the summer months.
Activity in the service sector in Germany continued to grow strongly in September, but the recovery from the pandemic lost momentum as the catch-up effects wore off and more companies were hit by bottlenecks supply bottleneck.
In France, service growth has fallen as inflationary pressures and COVID-19 protocols have impacted businesses. The growth of Italian and Spanish services also slowed.
Meanwhile, in Britain – outside of the monetary union – the post-lockdown economic recovery has avoided losing momentum last month, but companies have been raising prices at the fastest pace on record, adding signs of rising inflation.
(Reporting by Jonathan Cable; Editing by Catherine Evans)