(Reuters)-LONDON (Reuters) – A poll found manufacturing production growth in the euro zone stagnated this month as manufacturers battled to get raw materials and demand was weighed down by significant price rises and concerns about the economic future.
The Russian invasion of Ukraine, along with additional COVID-19-related lockdowns in China, worsened supply chain bottlenecks and left companies suffering, and forward-looking indications in the poll did not indicate a reversal approaching.
The final manufacturing Purchasing Managers’ Index (PMI) from S & P Global (NYSE: SPGI) dropped to a 15-month low of 55.5 in April from 56.5 in March, barely above the original “flash” estimate of 55.3 but comfortably over the 50 level separating expansion from contraction.
However, an output index, which feeds into a composite PMI coming out on Wednesday and is often seen as a strong barometer of economic health, fell to 50.7 from 53.1 in June 2020, during the bloc’s first wave of the coronavirus epidemic.
“Manufacturing production in the euro zone came to a virtual halt in April,“ said Chris Williamson, S&P Global’s senior business economist.
Companies said that not only did the Ukraine crisis and new Chinese lockdowns make it more difficult to get parts, but they also said that rising costs and more anxiety about the economy were hurting demand.
Input costs increased at one of the quickest rates in the survey’s history, and companies passed the increased costs on to consumers via record price increases. The output price index increased to 77.3 from 74.2, its highest level since late 2002, when S&P Global began collecting data.
This is expected to increase pressure on the European Central Bank to tighten policy further, since inflation in the currency union hit 7.5 percent last month, according to preliminary official data released last week, over four times the bank’s objective of 2%.
According to a Reuters poll last month, the European Central Bank is likely to boost its deposit rate before the end of the year. [ECILT/EU]
