Eurozone factory growth is strong in September but bottlenecks are widening


LONDON (Reuters) – Eurozone manufacturing growth remained strong in September, but activity was hit hard by supply chain bottlenecks that are expected to persist and keep inflationary pressures high, revealed an investigation Friday.

Factories have faced logistical challenges, product shortages and a labor shortage caused in large part by the continued disruption caused by the coronavirus pandemic which has forced governments to impose strict restrictions on mobility.

IHS Markit’s final Purchasing Managers’ Index (PMI) fell to 58.6 in September from 61.4 in August, and just below an initial “flash” estimate of 58.7.

An index measuring output, which feeds a composite PMI expected on Tuesday and is seen as a good indicator of economic health, fell from 59.0 to 55.6 in August. Anything over 50 indicates growth.

“While the eurozone’s manufacturing sector grew at a steady pace in September, growth weakened significantly as producers report a growing toll of supply chain headwinds,” Chris said. Williamson, Chief Economist at IHS Markit.

“Supply issues continue to wreak havoc across large swathes of European manufacturing, with delays and shortages being reported at rates not seen in nearly a quarter of a century and showing no signs of imminent improvement. “

These bottlenecks have kept the pressure on the costs of the raw materials that factories need. The input price index fell only from 87.0 to 86.9 in August.

However, factories passed on some of these increases to customers and the producer price index approached the summer high.

Inflation in the eurozone likely rose to 3.3% last month, with preliminary official data expected to show later on Friday, well above the European Central Bank’s 2.0% target.

Despite rising inflation, the ECB will cut back on emergency bond purchases this quarter, she said last month, taking a first small step towards unwinding emergency aid which supported the bloc’s economy during the coronavirus pandemic.

(Reporting by Jonathan Cable; Editing by Susan Fenton)

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