IHS Markit PMI: record manufacturing boom boosts Eurozone economies

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IHS Markit Flash Eurozone PMI has shown a stronger growth of business activity in April – the the fastest recorded since last July. A record expansion of manufacturing output was accompanied by a return to growth in the service sector.

The headline IHS Markit Eurozone Composite PMI® rose from 53.2 in March to 53.7 in April, according to the preliminary ‘flash’ reading, which is typically
based on approximately 85% of final responses.

Other key points in IHS Markit’s latest report are as follows:

  • Output has now risen for two months after four months of decline
  • Manufacturing output grew for a tenth straight month
  • The service sector continued to lag behind, principally reflecting further efforts to contain the spread of COVID-19
  • both France and the rest of the eurozone saw marginal expansions in the service sector for the first time since last summer
  • New order growth across the eurozone hit the highest since September 2018
  • Backlogs of work grew for a second month in a row, rising to an extent not seen since January 2018
  • firms in France and the rest of the region as a whole grew more optimistic
  • employment grew at the steepest pace since November 2018
  • Average input prices across both manufacturing and services rose at the sharpest rate for ten years
  • Service sector input cost inflation also picked up to hit a two-year high

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“In a month during which virus containment measures were tightened in the face of further waves of infections, the eurozone economy showed encouraging strength.

Although the service sector continued to be hard hit by lockdown measures, it has returned to growth as companies adjust to life with the virus and
prepare for better times ahead.

The manufacturing sector is meanwhile booming. Pent-up spending, restocking, investment in new machinery and growing optimism about the outlook
have all helped fuel a further record surge in both output and new orders.

The steep rise in demand for raw materials is continuing to lead to unprecedented supply chain delays, which are in turn driving up firms’ costs at the fastest rate for a decade. Consumer price inflation may well rise sharply in coming months as a result, though the extent of the rise will be dependent on the strength of demand and the supply situation, both of which remain highly uncertain at the moment.”

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