© Reuters. FILE PHOTO: The spread of coronavirus disease (COVID-19) continues in Frankfurt
By Jonathan Cable
Factory activity growth in LONDON (Reuters) and the Eurozone reached a record high in April. This was boosted by rising demand and hiring, although supply bottlenecks led to an unprecedented surge in unfulfilled orders, a survey found.
While a third wave of coronavirus infections in Europe has forced some governments to shut down much of their dominant service industries, factories have largely remained open.
IHS Markit's final purchasing managers' index (PMI) for manufacturing rose from 62.5 in March to 62.9 in April, but below the original 63.3 "Flash" estimate, but its highest level since the beginning of the Survey in June 1997.
An index performance that feeds into a composite PMI due Wednesday and is considered a good guide to economic health declined from a record high in March of 63.3 to 63.2. Anything over 50 indicates growth.
"The eurozone was late in terms of its economic recovery, but it seems to be beginning. If we look at where we are now, the numbers are encouraging," said ING's Bert Colijn.
"It's a foregone conclusion that the second quarter will be a lot stronger than the first quarter."
The order backlog rose from 60.4 to 61.5, a survey high.
French manufacturing growth has slowed somewhat from its March peak as bottlenecks weighed on recovery, but Italian factories grew the fastest, according to sister surveys.
German factories hummed along during the pandemic, almost undisturbed by the associated lockdowns, and activity in Europe's largest economy accelerated earlier this year due to strong demand from the US and China.
The most recent PMI was just below the March high at 66.4.
China's factory activity growth slowed and missed forecast as supply constraints and rising costs weighed on production, a poll revealed on Friday, while numbers due later on Monday suggest an acceleration in US factory growth. (Reuters: // realtime / verb = Open / url = cpurl: //apps.cp./Apps/econ-polls? RIC = USPMI% 3DECI survey data)
With raw material costs soaring near record levels, factories have had to raise their own prices at the sharpest pace since IHS Markit began collecting data.
"Cost pressures have increased, especially for manufacturers. Inputs from energy prices to raw material prices are increasing and bottlenecks in all parts of the economy are gradually affecting prices," said Colijn.
"It looks like this will have an impact on goods inflation later this year."
Inflationary pressures could be welcomed by policymakers at the European Central Bank, who, despite extremely loose monetary policies, have failed to bring inflation anywhere near their target.
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