Latest data released by Markit – 1 July 2021
A slight revision higher with the headline being yet another fresh record for a fourth consecutive month now as manufacturing conditions in the region keep more solid as virus restrictions are loosened, with output coming in strong.
That said, there is a consistent theme across all the readings and that is despite more robust demand conditions in general, there is marked supply-side constraints that are persisting – which is leading to price rises at a record pace in Europe.
It remains to be seen if said disruptions will eventually come to dampen demand prospects but for now things are still holding up well as the reopening gets underway.
Markit notes that:
“Eurozone manufacturing continued to grow at a rate
unbeaten in almost 24 years of survey history in June
as demand surged with the further relaxation of
COVID-19 containment measures and vaccination
progress drove renewed optimism about the future.
“However, the sheer speed of the recent upsurge in
demand has led to a sellers’ market as capacity and
transportation constraints limit the availability of
inputs to factories, which have in turn driven
industrial prices higher at a rate not previously
witnessed by the survey. Manufacturers are clearly
willing to pay more to ensure sufficient supplies of
“Encouragingly, there are several survey indicators
which add to hopes that the current spike in prices
will prove transitory.
“Widespread issues such as port congestion and a
lack of shipping containers should soon fade as the
initial rebound from the pandemic passes. Similarly,
recent months have seen safety stock building as
companies seek to protect themselves against
potential future supply-chain disruptions, which has
exacerbated the imbalance of demand and supply in
the short-term. Once sufficient stocks are built, this
effect should likewise fade.
“Finally, we have also seen the expansion of
capacity via record employment growth and greater
capital expenditure on business equipment and
machinery. This expansion should raise output in
sectors that are currently straining to meet demand,
and hence remove some of the upward pressure on
prices for these goods.”