March PMI: supply shocks distort Europe’s factory picture

Europe’s manufacturing sector remained in growth territory in March, but the underlying picture became more fragile as the war in the Middle East pushed up energy and transport costs, disrupted supply chains and unsettled demand. The eurozone Manufacturing PMI rose to 51.6 from 50.8, a 45-month high, while output also increased. However, the headline was flattered by a sharp worsening in supplier delivery times, which mechanically boosts the PMI because that component is inverted in the calculation.

March was not a month of straightforward industrial strengthening, but one in which freight disruption began to show up directly in factory surveys. Across much of Europe, manufacturers reported longer lead times, sharply higher input costs and a renewed need to rethink purchasing, stocks and pricing. Input prices for eurozone manufacturers rose at the fastest pace since October 2022, while output prices increased at the strongest rate in just over three years.

March PMI snapshot by country

The reaction, however, was far from uniform. In Germany, Italy and the Netherlands, firms still managed to grow, in part by building buffer stocks or benefiting from substitute demand. In the UK, demand held up better than output, suggesting that supply disruption is already constraining production. France and Spain looked weaker, as uncertainty began to hit sales more directly. Poland remained in contraction despite a return to output growth, while Romania stayed deeply weak, with the March shock felt mainly through higher costs rather than acute logistics breakdown.

What is driving March?

Germany: stock-building and stronger orders lift the sector, but the rebound is not entirely clean

Germany posted one of the strongest March readings among the major economies. The manufacturing PMI rose to 52.2 from 50.9, its highest since May 2022, with output and new orders both strengthening. But S&P Global made clear that the headline was boosted above all by worsening delivery times, linked to disruption stemming from the Middle East war, including delays to freight from Asia.

What makes Germany stand out is that supply disruption did not immediately crush demand. Instead, some firms reported that customers were placing more orders in order to build safety stocks and get ahead of future price increases. Export sales also rose at the fastest rate in nine months. That suggests Germany benefited, at least temporarily, from precautionary buying rather than from a fully organic recovery in end-demand.

Even so, the warning signs are clear. Input price inflation jumped to its highest since October 2022, with firms citing energy, transportation and raw-material costs. Confidence dropped sharply, and employment fell faster despite higher backlogs, suggesting that manufacturers do not yet trust the rebound.

United Kingdom: PMI stays above 50, but production falls back into contraction

The UK’s March release was one of the clearest reminders that a headline PMI above 50 does not necessarily mean the sector is strengthening. The UK manufacturing PMI slipped to 51.0 from 51.7, but production fell for the first time in six months. S&P said longer supplier lead times and still-positive new orders kept the headline above the no-change mark, but that those delivery delays were caused mainly by supply-chain stress linked to the Middle East conflict, not by strong demand.

The survey pointed to a marked impact from the closure of the Strait of Hormuz, with delivery times lengthening to the greatest extent in over four and a half years. At the same time, input prices rose at the quickest pace since October 2022, and the monthly jump in the input prices index was the second-steepest since the survey began in 1992. Nearly half of firms reported higher purchase prices.

Demand held up better than output. New orders rose for a fourth straight month, and export business also increased, with firms citing demand from the US, Europe, China, APAC and Brazil. Still, optimism fell sharply and employment dropped at the fastest pace since September 2025, showing that firms are already responding defensively.

France: stagnant headline masks a weaker reality underneath

France’s manufacturing sector looked flat on the surface, but the underlying picture worsened noticeably. The manufacturing PMI came in at 50.0, little changed from 50.1 in February, but even that reading was supported by the inverted supplier delivery-times component. Delivery times lengthened at the sharpest rate since January 2023 as the war in the Middle East disrupted logistics markets.

Beneath that, demand weakened. New orders fell at the fastest rate in five months, export demand deteriorated at the steepest rate since July last year, and firms reported cancellations and postponements from customers alongside weak domestic demand. Output also fell again, ending the limited growth seen at the start of the year.

French manufacturers were also hit by the sharpest rise in input costs since December 2022, driven by oil, electricity, metals and chemicals. Yet firms passed on only part of that increase, suggesting that pricing power remains weak.

Spain: one of the clearest deterioration stories in March

Spain’s manufacturing sector moved back into clearer contraction in March. The PMI fell to 48.7 from 50.0, the weakest reading since April 2025. Output declined for a second straight month, while new orders and export demand both posted their worst performance since last April. Firms overwhelmingly linked the weakening in sales to the conflict in the Middle East and the uncertainty it created.

Spain looks weaker than France because the deterioration was broader. Confidence about the year ahead dropped to its lowest level since October 2023, while firms also cut jobs and purchasing more aggressively. Employment fell at the fastest pace since October 2023.

The inflation shock was severe here too. Input prices rose at the fastest pace in nearly three and a half years, while supplier shortages worsened and delivery times lengthened at the sharpest rate since September 2022. Spanish firms raised their own charges where possible, but the overall tone of the survey was clearly defensive.

Poland: output returns, but demand still refuses to recover

Poland’s March PMI improved from 47.1 to 48.7, meaning the downturn softened, but the sector remained in contraction for an eleventh straight month. The main positive was that production rose for the first time since April 2025. However, the increase was weak and came despite another fall in new orders.

That mismatch is the key to Poland’s March story. New orders fell for a twelfth month running, and export demand also weakened more sharply. Because demand remained soft while output edged up, backlogs kept falling and firms cut employment at the fastest pace since September 2023. Purchasing and stocks also declined again.

Like elsewhere, the Middle East shock showed up clearly in costs. Input price inflation accelerated to its highest since October 2022, while output prices rose at the fastest pace since January 2023. Delivery times lengthened at the greatest extent since June 2022.

Italy: manufacturers buy ahead of disruption and keep growth alive

Italy managed to stay in positive territory in March, with the manufacturing PMI rising to 51.3 from 50.6, the strongest reading in over three years. Output and new orders both increased for a second month in a row, although both gains were only slight.

The crucial feature of the Italian survey was behaviour, not just the headline. Manufacturers increased purchasing activity for the first time in more than three years and built pre-production inventories for the first time in eight months. According to S&P, firms were doing this to protect themselves against further price increases and anticipated supply-chain disruption.

Input costs still surged, with firms citing higher energy, fuel, shipping, transportation and raw-material costs. Delivery times worsened to the greatest extent since October 2022. Yet employment kept rising, which places Italy in a stronger position than most of the other countries in the March set.

Netherlands: stronger orders and output, with signs of substitute demand

The Dutch manufacturing sector also improved in March. The PMI rose to 52.0 from 50.8, output growth strengthened and new orders returned to growth after two months of decline. But, as in Germany and Italy, part of the improvement reflected firms’ response to supply-chain disruption rather than a simple demand recovery.

Manufacturers reported longer waits for inputs, particularly those coming from Asia, with delivery performance worsening to the greatest extent in more than three and a half years. Input cost inflation jumped to a 41-month high, driven by higher prices for metals, plastic, fuel, energy and wages. Output prices also rose at the fastest pace in more than three years.

ABN AMRO’s commentary added an unusual twist: some Dutch firms may actually be gaining business from the disruption elsewhere. Foreign buyers were said to be turning to Dutch suppliers, and respondents reported higher orders from countries including Thailand, Singapore, China and Australia.

Romania: still deeply weak, with the shock showing up mainly through costs

Romania remained one of the weakest cases in the March dataset. The manufacturing PMI rose to 46.6 from a record low of 45.3, so the downturn softened, but the reading still pointed to a solid deterioration in business conditions. Output, new orders, employment, purchasing and stocks all continued to fall.

Demand was still the core problem. Both domestic and export orders declined again as customers stayed cautious because of constrained budgets and uncertainty. Output fell for a 22nd consecutive month, showing that Romanian manufacturing remains trapped in a prolonged downturn.

Unlike in Germany, the UK or the Netherlands, supply-chain disruption was relatively mild. Lead times lengthened only marginally. The crisis was felt more through prices: manufacturers reported higher raw-material, transportation and energy costs, and input price inflation was the second-strongest on record.

Europe’s factory map is starting to split

Taken together, the March PMIs show a continent dividing into three camps. One group — Germany, Italy and the Netherlands — is still managing to grow, partly by buying ahead, building buffers or attracting substitute demand. Another — notably the UK and Poland — is showing signs of resilience, but also clear fragility beneath the surface. The weakest group — France, Spain and Romania — looks more exposed to a combination of uncertainty, weak demand and rising costs.

For freight and logistics, the message is straightforward. The Middle East crisis is no longer only affecting oil, shipping and transport costs in isolation. It is now changing how European factories order, source, stock and price. March may therefore prove to be the month when supply-chain stress stopped being a background risk and became a visible part of Europe’s industrial data.