Eurozone Manufacturing PMI Rises as Factories Stockpile, Optimism Falls
Eurozone Manufacturing Activity and Economic Outlook
Inventory Build-Up Amid Supply Fears
LONDON, May 4 (Reuters) - Euro area manufacturers rushed to build inventories of raw materials in April amid fears of further supply disruptions and higher costs linked to conflict in the Middle East while business confidence slumped to its lowest since late 2024, a survey showed on Monday.
PMI Index Performance and Demand Trends
Headline PMI and New Orders
The headline S&P Global Eurozone Manufacturing PMI was distorted as customers also bought immediately rather than wait due to fears of more price increases and the predicted availability constraints. New orders - a key gauge for demand - grew at the fastest rate in four years.
Last month, the overall index rose to 52.2 from 51.6 in March, matching a preliminary estimate.
PMI readings above 50.0 indicate growth in activity.
Expert Commentary on Economic Situation
"Production and order books are being buoyed by the building of safety stocks as a result of widespread concerns over supply shortages and rising prices emanating from the war in the Middle East," said Chris Williamson, chief business economist at S&P Global Market Intelligence.
"Look instead to the survey's future output expectations index for a truer picture of the economic situation that is developing in the euro zone," Williamson added.
Business Confidence and Growth Outlook
Falling Optimism
The future output index - a gauge of optimism - dropped to 55.4 from 58.2, its lowest in 17 months.
Growth in the region had already slowed to 0.1% last quarter, below expectations for a 0.2% expansion.
Inflation, Costs, and Central Bank Response
Rising Input Prices and Factory Charges
Costs to manufacturers soared - the input prices index jumped to 77.0 from 68.9 - while factories raised charges at the quickest pace since January 2023. Inflation climbed further in the common currency area last month, official data showed last Thursday, as rising energy costs added to the case for interest rate hikes.
ECB Policy and Interest Rate Expectations
The European Central Bank left its deposit rate at 2.00% as expected on Thursday, but it signalled rising concerns over soaring inflation, leaving markets expecting it to lift rates several times this year with a likely initial move coming in June.
Country-Level PMI Readings and Employment Trends
National PMI Highlights
All eight euro zone countries monitored posted readings above 50.0 for the first time since June 2022. Ireland recorded the highest headline PMI, followed by the Netherlands, while France and Italy both saw their loftiest numbers in around four years. Germany's dipped slightly from the previous month.
Employment and Supply Chain Pressures
Job Cuts and Backlogs
Employment continued to decline, however, extending job cuts to almost three years despite rising backlogs of work.
Delivery Times and Supply Disruptions
As supply chain pressures intensified, delivery times lengthened to their slowest since July 2022 due to bulk ordering, Middle East war-related disruptions and reduced raw material availability.
(Reporting by Jonathan Cable; Editing by Hugh Lawson)
