“Eurozone manufacturing is booming, with production and order books growing at rates unprecedented in nearly 24 years of PMI survey history during March.
Although centred on Germany, which saw a particularly strong record expansion during the month, the improving trend is broad based across the region as factories benefit from rising domestic demand and resurgent export growth.
Driving the upturn has been a marked improvement in business confidence in recent months, with expectations of growth in the year ahead running at record highs in February and March. This has not only boosted spending but has also led to rising investment and restocking, as firms prepare for even stronger demand following the vaccine roll-out.
The picture is blighted, however, by record supply chain disruptions, which will likely be exacerbated further by delays arising from the Suez Canal blockage. Prices are already rising at the fastest rate for a decade as demand outstrips supply, resulting in a sellers’ market for many goods.
While the forces driving prices higher appear to be temporary, linked to the initial rebound from COVID19 lockdowns, any further upward pressure on firms’ costs and selling prices is unwelcome.
Encouragingly, the recent expansion of output means production in the eurozone is likely to have surpassed its pre-COVID peak, and hiring has already accelerated markedly as producers seek to build additional capacity to meet higher demand.”