Manufacturing output, on the other hand, broadly stagnated for a second consecutive month in March, the factory output index dipping from 50.1 to 49.9. The flat picture nevertheless represents an improvement on the solid declines seen throughout the second half of last year, according to the S&P Global ‘flash’ Eurozone PMI Composite Output Index survey.
The Eurozone’s PMI composite output index rose for the fifth month in a row in March 2023. While manufacturing output broadly stagnated for a second consecutive month in March, the overall picture represents an improvement on the declines seen in the second half of 2022. Supply chain improvements have taken further pressure off industrial input prices.
Within the euro area, output rose for a second straight month in both France and Germany, the former reporting the faster pace of expansion as its composite output index rose from 51.7 to 54.0, its highest since last May. However, it was the rest of the eurozone as a whole that again reported the strongest performance, the composite index up from 53.4 to an 11-month high of 55.5.
In manufacturing, factories also benefitted from fewer supply delays and input shortages. Average supplier delivery times shortened for a second consecutive month and to the greatest extent since data were first available in 1997, led by an unprecedented improvement in Germany.
The record easing of supply constraints marks a major reversal from the record delays seen during the pandemic and reflected not only an improvement in supply logistics, such as reduced port congestion and fewer container shortages, but also lower demand for inputs—which fell sharply again in March—and further efforts by companies to unwind high inventory levels. Stocks of purchases fell for a second month running in March having risen strongly throughout most of 2022.
Supply chain improvements, combined with falling demand, also took further pressure off industrial input prices, which fell for the first time since July 2020. Measured overall, input costs rose at the slowest rate since March 2021, yet with the rate of increase remaining well above the survey’s long-run ten-month high as firms sought to keep pace with rising demand, but holding steady in manufacturing at a relatively slower pace that was among the lowest seen over the past two years.
Finally, optimism about the year ahead dipped from February’s 12-month high but remained among the highest seen over the past year, running well above the levels seen late last year. Sentiment slipped lower in both manufacturing and services, though in both cases remained far above the levels seen late last year heading into the winter.
Future sentiment has improved considerably in both manufacturing and services since late last year, attributed by survey respondents to lower recession risks, falling inflation pressures, improved global supply chains, and reduced energy concerns, as well as signs of improved demand and confidence. The dip in sentiment in March could be in part traced to concerns over uncertainty caused by recent banking sector stress and the potential impact of further interest rate hikes.
Average prices charged for goods meanwhile continued to rise sharply, the rate of increase falling further from the peak seen last year to the lowest since May 2021, though remaining higher than any time in the survey’s history prior to the pandemic.
Finally, optimism about the year ahead dipped from February’s 12-month high but remained among the highest seen over the past year, running well above the levels seen late last year. Sentiment slipped lower in both manufacturing and services, though in both cases remained far above the levels seen late last year heading into the winter, S&P Global said.
Commenting on the flash PMI data, Chris Williamson, chief business economist at S&P global market intelligence, said: “The eurozone economy is showing fresh signs of life as we enter spring, with business activity growing at its fastest rate for ten months in March. The survey is consistent with gross domestic product (GDP) growth of 0.3 per cent in the first quarter, accelerating to an equivalent rate of 0.5 per cent in March alone.
“Growth has been buoyed since the lows of late last year as recession fears and energy market worries fade, inflation pressures ease and the unprecedented supply chain delays seen during the pandemic are replaced with record improvements to supplier delivery times. Business confidence is also so far showing encouraging resilience in the face of further interest rate hikes and the uncertainty caused by recent banking sector stress.”
Fibre2Fashion News Desk (NB)
