Eurozone manufacturing improves in February but Ukraine war could dampen outlook

Jonathan Lopez


MADRID (ICIS)–The eurozone’s PMI index measuring manufacturing activity remained healthy in February as demand for goods rose at its fastest rate since August 2021, analysts at IHS Markit said on Tuesday.

However, most of the survey responses to compile the PMI for February were conducted before Russia started its invasion of Ukraine on 24 February, which could greatly darken the outlook in the European economy.

Potential disruptions of Russian crude oil and natural gas supplies, on which the 19-country currency union and the wider 27-country EU are heavily dependent on, could lead to even higher inflation, said Markit.

Eurozone inflation stood at multiyear highs in January; Eurostat is due to publish a flash estimate for inflation in February on Wednesday (2 March).

“Now, the Russia-Ukraine situation, which also carries the risk of dampening growth, adds fresh fuel to inflation risks, and we’ve seen Brent crude already moving higher in response,” said Joe Hayes, senior economist at Markit.

“It’s going to take prudent macroeconomic policy management to re-anchor inflation expectations without denting the demand recovery too heavily.”

The manufacturing sectors across the eurozone were leaving behind the supply chain disruption and shortages of materials which caused a slowdown in activity in the second half of 2021.

This was reflected on February’s PMI data, which continued the positive trend from January, with all major economies healthily over the 50.0 points mark, which shows growth; a reading below 50.0 points would show contraction.

Activity in the UK was also healthy.

PMI manufacturing February January
Eurozone 58.2 58.7
– Germany 58.4 59.8
– France 57.2 55.5
– Italy 58.3 58.3
– Spain 56.9 56.2
UK 58.0 57.3

In the eurozone, output and new orders growth gained momentum in February, said Markit, and supplier delivery delays also eased.

“Nevertheless, capacities across the sector continued to be tested and, while rates of both input cost and output price inflation slowed in February, they were still among the fastest on record. Data split by the three broad market groups indicated stronger improvements at consumer and intermediate goods producers,” said Markit.

“While manufacturers of investment goods recorded a weaker expansion, they still performed strongest overall.”

In the UK, growth in industry also accelerated to a seven-month high in February on the back of stronger domestic demand, fewer raw material shortages, and easing global supply chain pressures.

Although input price inflation remained high, Markit’s latest survey also signalled that cost increases were starting to moderate.

Markit’s senior economist Joe Hayes concluded the outlook for the eurozone was trending higher on the back of “clearly strengthening” underlying sales as the Omicron coronavirus wave’s impact recedes.

“Another positive move was in the suppliers’ delivery times gauge, which moved up during February to its highest since the beginning of last year – signalling the least marked deterioration vendor performance since then,” he said.

“It was actually this move that pulled the headline PMI lower, but tentative signs of stabilisation across supply chains is a good thing because it will help production capacities increase and is what we need to see for inflation to cool. Inflation is still running extremely hot, however, and price setters clearly carry substantial pricing power still.”


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