Euro Zone Factory Growth Eases in October but PMI Stays Robust amid Challenges
Euro Zone Manufacturing Activity and Economic Outlook
Manufacturing Growth Trends and PMI Data
LONDON, Nov 2 (Reuters) - Euro zone manufacturing activity growth held up well in October, albeit easing as new order growth slowed and rising costs from energy and supply-chain disruptions squeezed margins, a survey showed on Monday.
The S&P Global Eurozone Manufacturing Purchasing Managers' Index (PMI) dipped to 52.7 last month from 52.9 in September — which was the highest reading since May 2022 — but was above a preliminary estimate of 52.4. Readings above 50.0 indicate growth in activity.
The figures suggest manufacturers are holding up despite tariffs, conflicts and surging energy costs, but rising input prices add to pressure on the European Central Bank to raise interest rates again.
Expert Commentary on Sector Resilience
"Another solid PMI reading extends the euro zone's best growth spell for manufacturing for over four years," said Chris Williamson, chief business economist at S&P Global Market Intelligence.
"The sustained growth recorded since February paints an encouraging picture of resilience for the manufacturing sector, which has been buffeted by the headwinds of tariffs and conflicts in the Middle East and Ukraine, and in particular the surge in costs and supply difficulties that these have caused."
Key Economic Factors Impacting Manufacturing
Energy Prices and Supply Chain Disruptions
Crude oil futures have been trading over $116 a barrel, about 60% above pre-Iran war levels.
ECB Policy and Leadership Changes
The European Central Bank left interest rates on hold last week as expected, but economists polled by Reuters last month said it would hike again in December. Its president Christine Lagarde also announced that she would step down next February.
Country Performance and Factory Output
Order Growth and Country Comparisons
Total new orders for factories — a key gauge of demand — rose at a slower pace in October, even as export orders posted their sharpest increase in more than 4-1/2 years. Six of the eight euro zone countries tracked by the survey recorded growth in activity. France and Italy were the outliers.
Output and Employment Trends
Factory output eased to a four-month low of 52.8 from 53.6 in September though it remained above its long-run survey average. Manufacturers added staff for a third straight month.
Inflation, Costs, and Supply Chain Pressures
Operating Costs and Pricing Strategies
Factories' operating costs rose at the fastest rate in five months in October and firms raised selling prices sharply in response although the pace of increase was broadly unchanged from September.
Input Cost Inflation and ECB Pressure
"With input cost inflation surging sharply higher again in October, climbing to one of the highest rates seen over the past four years thanks to higher energy prices and supply bottlenecks, the latest PMI data add to pressure on the ECB to hike rates further in the coming months, providing another headwind to businesses," Williamson added.
Supply Chain Strains and Inventory Management
Supply-chain strains intensified during the month and delivery times lengthened to their worst since June. Manufacturers ramped up purchasing volumes at the fastest rate in nearly 4-1/2 years while stockpiling raw materials for the first time since December 2022.
(Reporting by Jonathan Cable; Editing by Hugh Lawson)
