Eurozone factories buzz in February as demand soars

LONDON (Reuters) – Eurozone factory activity picked up in February on skyrocketing demand, a survey showed on Monday, although the boom in business led to a shortage of raw materials and soaring input costs.

Restrictions imposed across the continent in an attempt to quell the spread of the coronavirus have shut down large swathes of the bloc’s dominant service industry, meaning the onus is on manufacturers to support the economy.

IHS Markit’s Manufacturing Purchasing Managers’ Index (PMI) jumped to a three-year high of 57.9 in February from 54.8 in January, ahead of the initial ‘flash’ estimate of 57.7 and one of the highest values ​​in the 20-year history of the survey.

An index measuring output, which fuels a composite PMI expected Wednesday and seen as a good guide to economic health, rose from 54.6 to 57.6, well above the 50 mark separating growth from contraction .

“The manufacturing sector is emerging as an increasingly bright spot in the euro area economy so far this year,” said Chris Williamson, chief business economist at IHS Markit.

“Strong manufacturing expansion is clearly helping to offset the current virus-related weakness in many consumer sectors, mitigating the impact of recent lockdowns in many countries and helping to limit the overall pace of the economic contraction.”

A Reuters poll last month showed the bloc was in a double-dip recession and the economy would contract 0.8% this quarter after declining 6.9% in 2020 on an annual basis. [ECILT/EU]

Growing demand for manufactured goods prompted factories to increase their workforce for the first time in nearly two years.

But the lockdown measures disrupted supply chains and factories struggled to obtain raw materials, resulting in a sharp increase in delivery times.

“The growth spurt has posed its own problems, however, as demand for inputs has not yet been met by supply. Shipping delays and material shortages are widely reported, and have led to near record delays in the supply chain, ”said Williamson.

These shortages have allowed suppliers to increase their prices at the fastest rate in nearly a decade. The input price PMI rebounded to 73.9 from 68.3.