A survey revealed that manufacturing activities in the euro zone remained strong in September but took a big hit from bottlenecks in supply chains that are likely to persist and keep inflationary pressures at a high level.
Factories are suffering from logistical problems, product shortages and a labor crisis caused in large part by the ongoing turmoil due to the coronavirus pandemic that has forced governments to impose strict restrictions on movement.
The final reading of the IHS Markit Manufacturing Purchasing Managers’ Index fell to 58.6 in September from 61.4 in August, down just slightly from a preliminary reading of 58.7.
An index measuring production, feeding into the composite Purchasing Managers’ Index due on Tuesday and considered a good gauge of the economy’s health, fell from 59.0 in August to 55.6. Any reading above the 50 level indicates growth.
“While manufacturing has expanded in the Euro-zone At a strong pace in September, growth weakened significantly as producers reported mounting losses due to adverse factors in supply chains.
“Supply problems continue to wreak havoc in large parts of the European manufacturing sector, with delays and shortages reported at rates unseen for nearly a quarter of a century and with no sign of imminent improvement.”
The bottlenecks kept pressure on the costs of raw materials needed by factories. The input price index fell only slightly from 87 in August to 86.9.
But factories passed some of those increases on to consumers and the production price index approached a summer high.