Published by Global Banking & Finance Review®
Posted on April 1, 2026
2 min readLast updated: April 1, 2026
Add as preferred source on GoogleEuro‑zone factory activity rose in March to its strongest level in almost four years—PMI surged to 51.6—even as inflation from Middle East conflict and supply‑chain snarls paint a fragile recovery.
LONDON, April 1 (Reuters) - Euro zone manufacturers faced soaring input costs and supply chain disruptions in March due to the Iran war, even as underlying tepid demand threatened to undermine the sector's fragile recovery, a survey showed.
The conflict in the Middle East has disrupted global logistics networks, causing delivery delays and pushing input price inflation to its highest levels since October 2022, distorting headline growth measures.
A jump in the cost of manufacturing, driven by higher oil and energy prices, led manufacturers to respond by raising selling prices at the fastest pace in just over three years.
"It's exactly the same as during the pandemic - this is a supply shock - normally longer delivery times are associated with too much demand in a really healthy environment but in a supply shock it falsely elevates the PMI," said Chris Williamson, chief business economist at S&P Global.
"It does falsely elevate the PMI so conditions would be worse than the headline PMI indicates," he also said.
The S&P Global euro zone Manufacturing Purchasing Managers' Index rose to 51.6 in March from 50.8 in February, higher than a preliminary estimate of 51.4.
A reading above 50.0 indicates growth in activity.
The new orders sub-index - a key gauge of demand - matched February's 46-month high but growth remained modest.
Production rose for a third consecutive month, with the output sub-index edging up to 52.0 from 51.9 in February, marking a seven-month high.
New export orders stabilised after contracting for eight straight months, providing some relief to manufacturers.
Backlogs of work increased for the first time since mid-2022, signalling capacity pressures, yet companies cut jobs at a faster rate in March.
Business confidence slipped to a five-month low and remained below its long-term average as the conflict weighed on sentiment.
Germany and Italy recorded their strongest readings in 46 and 37 months respectively, while Spain was the only country in contraction territory. Greece posted the highest reading, followed by Ireland, while France's manufacturing sector stagnated.
(Reporting by Jonathan Cable; Editing by Hugh Lawson)
Supply chain disruptions inflated headline growth figures, despite underlying demand remaining modest and input costs rising due to the conflict in the Middle East.
The Iran war disrupted global logistics, causing delivery delays and pushing input price inflation to its highest level since October 2022.
The PMI rose to 51.6 in March, indicating growth and reaching the highest level in nearly four years.
Germany and Italy saw their strongest readings in years, while Spain was the only country in contraction territory. Greece posted the highest reading.
Manufacturers raised selling prices at the fastest pace in over three years in response to higher oil and energy prices.
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