PMI Data Shows Strong Growth In Euro Zone Factory Activity In April

A surge in demand has propelled factory activity growth kin the euro zone to a record high in the month of April resulting in a surge in hiring according to a survey, even though there was also an unprecedented rise in unfulfilled orders because of supply issues.

Factories in Europe have remained open even though some governments have been forced to close down their dominant service industries because of a wave of coronavirus infections in Europe.

IHS Markit’s final Manufacturing Purchasing Managers’ Index (PMI) rose to 62.9 in April from March’s 62.5. it was however below that initial 63.3 “flash” estimate. But yet the number was the highest for the euro zone since June 1997 when the survey began.

“The euro zone was late out of the gates in terms of its economic rebound but it does seem to be starting. Looking at where we are now the numbers are encouraging,” said Bert Colijn at ING. “It is a foregone conclusion that Q2 will be much stronger than Q1 was.”

The backlogs of work index soared to 61.5 from 60.4, which was also a high, the survey showed.

With bottlenecks weighing down on a recovery of the manufacturing sector in France, the survey showed it slid down a bit from the peak in March. Sister surveys showed that the fastest rate on record was noted for Italian factory activity growth.

 The activities in German factories have been ongoing as usual even during the pandemic as this sector was almost undisturbed by the related lockdowns. Early this year, strong demand from the United States and China resulted in factory activity in Europe’s biggest economy to accelerate. Its latest PMI was only just below March’s high at 66.4.

Another survey showed that with supply bottlenecks and rising costs weighing down on production, there was a slowdown in China’s factory activity growth and its missed forecasts for April. Factory activity growth in the United States accelerated.  

Factories in Europe have been forced to raise the prices for their products at the sharpest rate since data collection was started by IHS Markit because of the cost of raw materials increasing at a pace that is near record highs.

“There has been an increase in cost pressures, mainly for manufacturers. Inputs ranging from energy prices to commodity prices are rising and shortages in all sorts of parts of the economy are starting to have an impact on prices,” Colijn said.

“It does look like that will start to have an impact on goods inflation over the course of this year.”

For policymakers at the European Central Bank, inflationary pressures might be welcomed since the policy makers have not been able to increase inflation to anywhere close to their target even with ultra-loose monetary policy.

(Adapted from TheDailyStar.com)



Categories: Economy & Finance, Entrepreneurship, Regulations & Legal, Strategy, Sustainability

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