According to the report from IHS Markit, eurozone business activity grew at a sharply faster rate in May as economies continued to open up from virus restrictions. The rate of expansion hit the highest for over three years as new order inflows surged to an extent not seen for almost 15 years. Business optimism about the year ahead continued to break new highs, but price gauges rose further – hitting all-time highs in manufacturing – as demand continued to outstrip supply for many goods and services.

The headline Eurozone Composite PMI rose from 53.8 in April to 56.9 in May. The latest reading was the highest since February 2018 and indicated a third successive month of output growth.

New order growth meanwhile surged to the highest since June 2006, outpacing growth of output to the greatest extent in the survey’s 23-year history. Backlogs of uncompleted orders consequently rose to a degree not surpassed since that series began in November 2002, underscoring the growing shortfall of current output relative to demand. Businesses meanwhile view the outlook as increasingly positive, with optimism about the year ahead the brightest since comparable data on future sentiment were available in 2012, most commonly linked to the vaccine roll-out permitting a further relaxation of COVID-19 restrictions in the coming months.

The strengthening of demand and brighter outlook prompted firms to again take on extra staff, with employment rising for a fourth successive month in May. However, although the rate of job creation remained the second-highest in just under two years, it waned slightly due to instances of difficulties in filling job vacancies.

By sector, the upturn continued to be led by manufacturing, where output grew for an eleventh straight month with the rate of expansion easing only modestly further from March’s all-time high.