What's going on?

Data out on Thursday showed that eurozone business activity grew by more than expected this month, so conflict-averse economists can finally sleep a little easier.

What does this mean?

Russia�s invasion of Ukraine has had serious knock-on effects across Europe, driving up the price of oil and forcing companies and consumers alike to pay more to keep things ticking over. So it stands to reason that economists might�ve been expecting European business activity to take a turn for the worse. Not quite: according to this month�s business activity survey, Europe�s companies have turned out to be surprisingly resilient. Manufacturing activity still managed to grow, if at its slowest since January last year. And while shoppers and drinkers might be cash-strapped, they�re not going to let that ruin their post-Covid revelry: activity across the region�s services industry saw an uptick too.

Why should I care?

For markets: Mamma mia.
Europe�s businesses have one advantage you don�t: they can pass their higher costs onto customers. And that�s exactly what they�ve been doing, with an index tracking the prices of their products hitting a record high this month. Trouble is, that alone could push inflation even higher and take a serious toll on the region�s economies. JPMorgan certainly seems to think so: the investment bank just slashed its outlook for Italy�s economic growth this year from 4.8% to 2.5%, and Spain�s from 6% to 4.2%.

The bigger picture: Don�t tell the ECB the odds.
This data might vindicate the European Central Bank�s bravado from earlier this week: the ECB admitted that the Russian-Ukrainian war probably would impact economic growth in the region, but also said that it wasn�t too worried. In fact, it said it�s expecting the region�s economy to grow by 2.3% this year, even in the worst-case scenario.