London —  Eurozone factory activity growth surged to a record high in April, boosted by burgeoning demand, though supply constraints led to an unprecedented rise in unfulfilled orders.

While a third wave of coronavirus infections in Europe has forced some governments to shutter much of their dominant service industries, factories have largely remained open.

IHS Markit's final manufacturing purchasing managers’ index (PMI) rose to 62.9 in April from March’s 62.5, albeit below the initial 63.3 “flash” estimate, but the highest reading since the survey began in June 1997.

An index measuring output, which feeds into a composite PMI due on Wednesday and that is seen as a good guide to economic health, edged down from March’s record high of 63.3 to 63.2. Anything above 50 indicates growth.

“The eurozone was late out of the gates in terms of its economic rebound but it does seem to be starting. Looking at where we are now the numbers are encouraging,” said Bert Colijn at ING. “It is a foregone conclusion that Q2 will be much stronger than Q1 was.”

The backlogs of work index soared to 61.5 from 60.4, a survey high.

French manufacturing growth eased off a little from March’s peak as bottlenecks weighed on the recovery but Italian factory activity grew at its fastest rate on record, related surveys showed.

German factories have been humming along during the pandemic, almost undisturbed by the related lockdowns, and activity accelerated in Europe’s biggest economy early in 2021 on strong demand from the US and China. Its latest PMI was only just below March’s high at 66.4.

With the cost of raw materials rising at a near record pace, factories were forced to raise their own prices at the sharpest pace since IHS Markit began collecting the data.

“There has been an increase in cost pressures, mainly for manufacturers. Inputs ranging from energy prices to commodity prices are rising and shortages in all sorts of parts of the economy are starting to have an impact on prices,” Colijn said. “It does look like that will start to have an impact on goods inflation over the course of this year.”

Elsewhere,  the outlook for Switzerland’s industrial sector continued to brighten in April as the PMI rose to 69.5 points, its highest since records began in 1995. Readings for order backlog, purchase prices and suppliers’ delivery times also hit records, while output was the second-highest after only July 2006.

Asia’s manufacturing activity remained robust through April even as a gauge of factory output in China, the region’s top economy and industrial powerhouse, showed signs of cooling.

Taiwan’s IHS Markit April manufacturing purchasing managers’ index rose to 62.4 from 60.8 in March, its highest reading since March 2010. New orders also reached their highest level since the same month.

South Korea’s IHS Markit PMI index for April slipped to 54.6 from 55.3 but remains well above the 50 level. It was the seventh straight month of expansion for the South Korean gauge, a first in almost a decade. 

China’s factory activity growth slowed and missed forecasts in April as supply bottlenecks and rising costs weighed on production and overseas demand lost momentum. The country's official manufacturing PMI fell to 51.1 in April from 51.9 in March, data from the national Bureau of Statistics showed on Friday.

Growth in Brazil's manufacturing sector decelerated in March to its slowest rate since June 2020. The headline PMI fell to 52.3 in April from 52.8 in March, the lowest since last June. While a brutal second wave of the Covid-19 pandemic weighed on overall activity, employment rose and companies were more optimistic about future conditions, IHS Markit’s PMI report showed.

Mexico’s manufacturing sector showed tentative signs of recovery. The IHS Markit PMI rose to 48.4 in April from 45.6 in March as business conditions again contracted but at their slowest pace since the start of the  pandemic. 

Reuters, Bloomberg

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