IHS Markit’s Eurozone Composite PMI has shown that business activity in the Eurozone returned to growth in March thanks to a rise in manufacturing output as global demand continued to recover from pandemic setbacks.
The headline IHS Markit Eurozone Composite PMI® rose from 48.8 in February to 52.5 in March. The latest reading indicated the first increase in business activity since last September.
IHS Markit say the manufacturing upturn was led by a record surge of factory production in Germany, accompanied by the fastest production growth since January 2018 in both France and the rest of the region as a whole.
Other key points in IHS Markit’s latest report are as follows:
- The service sector declined again due to virus-related restrictions, though the drop was the weakest since August 2020
- Goods prices rose especially markedly, posting the largest rise for almost ten years. This was largely down to suppliers hiking prices amid record supply chain delays as shortages worsened
- Manufacturing output growth accelerated sharply to the highest since data were first available in 1997
- Inflows of new business returned to growth over the eurozone as a whole, increasing to the greatest extent since last July
- The upturn in order book inflows caused backlogs of work to rise for the first time in 28 months, growing especially sharply in Germany.
- France reported the highest rate of job creation, with jobs growth at the steepest since October 2018
- Average prices charged for goods and services rose to a degree not seen since January 2019, with goods prices rising particularly steeply
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“The eurozone economy beat expectations in March, showing a much better than anticipated expansion thanks mainly to a record surge in manufacturing output.”
“The service sector remains the economy’s weak spot, but even here the rate of decline moderated in March as companies benefited from the manufacturing sector’s upturn, customers adapted to life during a pandemic and prospects remained relatively upbeat.
“The outlook has deteriorated, however, amid rising COVID-19 infection rates and new lockdown measures. This two-speed nature of the economy will therefore likely persist for some time to come, as manufacturers benefit from a recovery in global demand but consumer-facing service companies remain constrained by social distancing restrictions.
“The surge in demand for manufactured goods is meanwhile stretching supply chains to an unprecedented extent, in turn pushing costs up at the fastest rate for a decade. These cost pressures will likely feed through to higher consumer price inflation in coming months.”
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