Euro area manufacturing expanded at a record rate in May, led by continued solid growth in output and new orders, latest survey data from IHS Markit confirmed Tuesday.
The final Eurozone manufacturing purchasing managers’ index, or PMI, rose to 63.1 in May from 62.9 in April. The flash reading for the index was 62.8.
The latest reading was the highest in the survey history for which data is available since June 1997.
A PMI reading above 50 suggests growth in the sector. Eurozone manufacturing has now grown for eleven months in a row.
Demand remained strong and export orders rose at a record pace. Vendor delivery times deteriorated at a record pace and inflationary pressures intensified further. Supply issues pushed input prices to an unprecedented level and output prices rose at the fastest pace in 18 years of data availability.
Employment grew for fourth successive month and at the fastest pace since January 2018. Business confidence eased to the lowest level in fourth months, but remained strong.
“Manufacturers remained buoyed by the potential opportunities over the coming year from the hoped-for further reopening of economies and easing of restrictions related to dealing with the COVID-19 pandemic,” IHS Markit said.
Among the main three market groups, investment good producers were the best performers. Intermediate goods and consumer goods producers also registered solid growth.
“The survey data therefore indicate that the economy looks set for strong growth over the summer but will likely also see a sharp rise in inflation,” IHS Markit Chief Business Economist Chris Williamson said.
“However, we expect price pressures to moderate as the disruptive effects of the pandemic ease further in coming months and global supply chains improve.”
The economist expects demand to shift from goods to services as economies continue to reopen, taking some pressure off prices but helping to sustain a solid pace of economic recovery.
PMI reading hit record highs in the Netherlands, Austria, Ireland, and Italy.
In Germany, the factory PMI fell to a three-month low of 64.4, but was stronger then its flash reading of 64.
France’s manufacturing PMI score rose to 59.4, which was the strongest since September 2000. The flash reading was 59.2.
Spain’s factory PMI climbed to 59.4 from 57.7 in April. The latest reading was the highest since May 1998.
Italy’s reading hit a record high 62.3 in May.
The Netherlands’ 69.4 was the strongest PMI reading among all surveyed euro area countries.
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