Same old supply issues disrupting the manufacturing sector in Europe

London (Nov 2)  This morning manufacturing PMI's are telling a familiar story as supply-side issues are forcing a slowdown despite demand remaining firm. The report said, "The eurozone manufacturing sector lost further momentum in October, the latest PMI data showed, as supply-side issues interrupted production schedules and dented order books, causing the growth of both metrics to slow."

Looking deeper into the report it was not all bad news. PMI movements varied by euro area constituents during October. The fastest-growing manufacturing sectors, the Netherlands, Ireland, and Italy respectively, all recorded stronger expansions, as did Greece. In regards to the economic powerhouse of Europe (Germany), surging input costs drove a record rise in factory gate charges.

Phil Smith, Associate Economics Director at IHS Markit noted "Worryingly, the supply problems took a turn for the worse in October, with lead times on purchases lengthening to the greatest extent for three months. Adding to this, the rate of cost inflation has crept back up towards the record highs seen in the summer, leading to an unprecedented rise in factory gate prices and putting more inflationary pressure into the system." He then added "Manufacturers lost further confidence that these issues
will be resolved sooner rather than later, with business expectations now at their lowest since August 2020."

It is fair to remember that this is the final reading post flash estimates so none of this has come as a massive surprise. But nevertheless, the supply side issues are a worry due to the inflation woes currently being faced by the ECB. As the likes of India and China battle with the COVID pandemic, the situation must be watched closely during the winter months to see if the lockdowns and restrictions escalate.

EU Manufacturing PMI (Oct) 58.3 vs exp 58.5 prev 58.5
German Manufacturing PMI (Oct) 57.8 vs exp 58.2 prev 58.2
French Manufacturing PMI (Oct) 53.6 vs exp 53.5 prev 53.5
Italian Manufacturing PMI (Oct) 61.1 vs exp 59.7 prev 59.7
Spanish Manufacturing PMI (Oct) 57.4 vs exp 58.1 prev 58.1

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