Euro zone factory output growth stalled in April

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© Reuters. FILE PHOTO: A worker at German manufacturer of silos and liquid tankers, Feldbinder Special Vehicles, moves rolls of aluminium at the company’s plant in Winsen, Germany, July 10, 2018. REUTERS/Fabian Bimmer

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LONDON (Reuters) – Euro zone manufacturing output growth stalled last month as factories struggled to source raw materials while demand took a knock from steep price increases and fears about the economic outlook, a survey showed.

Russia’s invasion of Ukraine, coupled with renewed COVID-19 related lockdowns in China, have exacerbated supply chain bottlenecks and left factories struggling and forward looking indicators in the survey did not point to an imminent turnaround.

S&P Global (NYSE:)’s final manufacturing Purchasing Managers’ Index (PMI) fell to a 15-month low of 55.5 in April from March’s 56.5, just above below an initial “flash” estimate of 55.3 and still comfortably above the 50 mark that separates growth from contraction.

But an index measuring output, which feeds into a composite PMI due on Wednesday and seen as a good gauge of economic health, sank to 50.7 from 53.1, its lowest since June 2020, when the bloc was enduring the first wave of the coronavirus pandemic.

“Manufacturing output came to a near standstill across the euro zone in April,” said Chris Williamson, chief business economist at S&P Global.

“Companies not only reported that ongoing problems with component shortages were aggravated by the Ukraine war and new lockdowns in China, but that rising prices and growing uncertainty about the economic outlook were also hitting demand.”

Input costs rose at one on the fastest rates in the survey’s history and factories passed that on to customers by raising their prices at a record pace. The output prices index climbed to 77.3 from 74.2, its highest since S&P Global started collecting the data in late 2002.

That is likely to add pressure on the European Central Bank to tighten policy as inflation in the currency union reached 7.5% last month, preliminary official date showed last week, almost four times the Bank’s 2% target.

The ECB is expected to raise its deposit rate before year-end, a Reuters poll showed last month. [ECILT/EU]

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