May 20, 2022
A manufacturing facility

Manufacturing output growth slowed in the Eurozone last month, with factories battling against shortages of raw materials and demand dropping due to inflation and fears over global instability.

Russia’s invasion of Ukraine has disrupted supply lines across Europe and beyond, whilst the strict measures imposed by China in the face of renewed Covid-19 outbreaks has seen output in some cities grind to a standstill, exacerbating the situation further. In addition to facing rising costs for raw materials manufacturers in some industries have been struggling to locate the needed resources at any price.

S&P Global’s manufacturing Purchasing Managers’ Index (PMI) fell to 55.5 in April from 56.5 in March, a 15-month low. Whilst still a good margin above 50, which indicates contraction rather than growth, the slide closer to that figure is cause for concern.

Chris Williamson, chief business economist at S&P Global, pointed to the obvious supply issues caused by events in Ukraine and China, but also acknowledged that consumer demand was waning in the face of rising prices and economic uncertainty.

“Manufacturing output came to a near standstill across the euro zone in April,” said Williamson.

“Companies not only reported that ongoing problems with component shortages were aggravated by the Ukraine war and new lockdowns in China, but that rising prices and growing uncertainty about the economic outlook were also hitting demand.”

Input costs rose substantially in light of the increased cost of resources, with prices rising to record highs as manufacturers passed costs on to customers. S&P Global’s output prices index jumped 74.2, the highest level since the firm started collecting data in 2002.