Euro zone Oct factory growth hurt by supply woes, price pressures -PMI

FILE PHOTO: A worker wears a protective mask at the Volkswagen assembly line after VW re-starts Europe’s largest car factory after coronavirus shutdown in Wolfsburg, Germany, April 27, 2020, as the spread of the coronavirus disease (COVID-19) continues. Swen Pfoertner/Pool via REUTERS

LONDON (Reuters) – Manufacturing activity remained strong in the euro zone last month but supply chain bottlenecks and logistical problems sent input costs soaring and curtailed growth, a survey showed on Tuesday.

Ongoing disruptions caused by the coronavirus pandemic, alongside a shortage of heavy goods vehicle drivers, has caused product shortages and left factories struggling to get the raw materials they need.

IHS Markit’s final manufacturing Purchasing Managers’ Index (PMI) dipped to an eight-month low of 58.3 in October from September’s 58.6, shy of an initial 58.5 “flash” estimate but still comfortably above the 50-mark separating growth from contraction.

An index measuring output, which feeds into a composite PMI due on Thursday and seen as a good guide to economic health, dropped to 53.3 from September’s 55.6, its lowest reading since June last year.

“Euro zone manufacturers reported a worsening of the supply chain situation in October, which curbed production growth sharply during the month,” said Chris Williamson, chief business economist at IHS Markit.

“Average delivery times for raw materials lengthened at a rate exceeded only twice in almost a quarter of a century of survey data as companies reported demand once again running ahead of supply for a wide variety of inputs and components.”

Those shortages meant suppliers were able to jack up their charges, and the input prices index climbed to 89.5 from 86.9, the highest since the survey began in mid-1997.

Although the bloc’s economy continued to boom over the summer as activity rebounded after coronavirus lockdowns, inflation is also blowing past expectations, official data showed last week.

European Central Bank President Christine Lagarde acknowledged last Thursday that inflation would be high for even longer but pushed back against market bets that price pressures would trigger an ECB interest rate hike as soon as next year.

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