eurozone manufacturing pmi
(Source: IHS Markit)

Eurozone manufacturing PMI dips amid disruptions

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The eurozone manufacturing sector lost further momentum in October. The IHS Markit Eurozone Manufacturing PMI was revised lower to 58.3 last month, from an initial estimate of 58.5 and compared with September’s final 58.6, as supply chain issues interrupted production schedules and dampened orders. Overall, this signaled the slowest improvement in manufacturing sector conditions since February.

Firms’ struggles to obtain manufacturing inputs was also clear in survey data, with supplier delivery times lengthening to one of the most severe extents on record. Subsequently, input cost and output price inflation rates surged to new survey peaks.

In Germany, eurozone’s largest economy, and France, the respective Manufacturing PMIs slumped to nine-month lows. Material shortages and supply bottleneck restrained Germany’s manufacturing output and new orders. The BME manufacturing PMI stood at 57.8 last month, down from 58.4 in September and the flash score of 58.2.

Elsewhere, Netherlands, Ireland and Italy respectively, all recorded stronger expansions, as did Greece.

“Eurozone manufacturers reported a worsening of the supply chain situation in October, which curbed production growth sharply during the month” Chris Williamson, Chief Business Economist at IHS Markit said.

Supply-side issues were central to the softer expansion in the euro area manufacturing sector during October. Average lead times on input deliveries lengthened drastically and to the third greatest extent in the survey history (since 1997), beaten only by those seen in May and June. Low shipping container availability, widespread shortages of components and raw materials and issues with transportation were all mentioned as sources of supply-chain pressures in October.

Difficulties in acquiring the inputs necessary for production was a frequently-cited reason by companies who lowered output in the latest survey period. Although production increased, the rate of expansion slumped to the slowest in the current 16- month growth sequence, IHS said.

These issues had a similar impact on order books, according to firms. New business intakes continued to rise during October, but the rate of expansion was the weakest since January.

Inflationary pressures intensified across the euro area, with input costs and output prices both rising at new survey-record rates in October.

“Business confidence also lost some ground to hit a one-year low in October, as increasing numbers of producers grew concerned about the supply situation and the impact of rising costs and prices, adding to the indications that manufacturers face some challenging months ahead” Williamson concluded.

In Asia, factory activity stepped up a gear in October, while in the United States manufacturing activity slowed, data showed on Monday (Nov. 1).