Eurozone private sector growth slows further on supply chain woes

Author: Tom Brown

2021/10/22

LONDON (ICIS)--Supply bottlenecks and unease about higher COVID-19 infection rates continued to weigh on private sector growth in the region this month, with the pace of manufacturing output growth slowing the most since the start of the pandemic.

The gradual slowdown in the pace of the eurozone recovery because of supply chain disruption cooling productivity continued this month. The composite purchasing managers’ index (PMI) data for the service and manufacturing sectors sank to 54.3, the lowest rate in six months, according to IHS Markit.

UK growth rebounded to 56.8, a three-month high, as continuing service sector momentum helped to offset a manufacturing sector slowdown brought on by severe shortages of raw materials and staff.

PMI
(Below 50 = contraction)
October flash September final
Eurozone composite 54.3 56.2
UK composite 56.8 54.9

Manufacturing sector growth, which rebounded more quickly after the initial spate of lockdowns across Europe last year, slowed to its weakest since April 2020 this month. Players attributed the slowdown to supply constraints, with delivery times lengthened to some of the most substantial in decades.

Producers also saw the most significant price increases in the history of Markit’s PMI survey as firms sought to pass on cost hikes down the value chain.

The most substantial deterioration was seen in the automotive and auto parts sectors, with the pace of output declines continuing to gain speed. French manufacturing slipped back into decline and productivity stalled in Germany, the firm added.

The dissipating momentum means the eurozone enters the fourth quarter of the year with the slowest growth since early 2021, while prices continue to climb ever higher, Markit chief economist Mark Williamson said.

A manufacturing sector beset with supply chain delays saw production growth falter to the lowest since the first lockdowns of last year. The services sector has meanwhile seen some of the summer rebound fade just as
resurgent virus case numbers bring renewed concerns, notably in Germany, he said.

“These worries have once again hit the consumer-facing travel, tourism
and recreation sectors in particular,” he added, noting that economic risks seem to have tilted to the downside.

Thumbnail picture: UK's Felixstowe port. Photo by Paul Marriott/Shutterstock