Neil DennisManufacturing activity in the eurozone stabilised in November following several months of slowing growth, but inflationary concerns were unlikely to be eased for policymakers at the European Central Bank by Wednesday's survey of eurozone purchasing managers.
While the euro was barely moved by the uptick in November's Markit Purchasing Managers' Index (PMI), equity investors showed renewed vigour after Tuesday's sell-off, pushing the Euro Stoxx 600 index up by 1.6%.
The November manufacturing PMI rose to 58.4, up fractionally from October's 58.3, but down two percentage points from the preliminary reading of 58.6 two weeks ago. November's rise followed four-straight months of slowing growth in the manufacturing sector.
Consumer goods growth
Growth was driven by an acceleration in the production of consumer goods, but investment goods and intermediate goods showed further slowing growth. At national level, the greatest rates of expansion were seen in Italy and Greece, while subdued production was seen in France and Germany.
Production rose at a robust level, albeit at the second-weakest rate in the current 17-month growth sequence. A similar trend was seen in new orders as demand improved.
Manufacturers continued to report considerable headwinds from supply-related constraints and rising input costs. Nevertheless, demand continued to outstrip supply and helped producers sell at elevated prices.
Sellers’ market
"November saw a continuing sellers’ market, pushing prices charged for manufactured goods higher at a rate surpassing anything previously recorded in almost two decades," said Chris Williamson, chief business economist at IHS Markit.
He added: "Higher factory gate prices suggest consumer inflation has further to rise."
The outlook, however, has darkened considerably since the preliminary reading, and little of the concerns over news COVID variants will have been reflected in the November survey.
Williamson concluded: "Rising Covid-19 infection rates cast a darkening cloud over the near-term outlook, threatening to further disrupt supply chains while at the same time diverting spending from consumer services to consumer goods again, therefore worsening the imbalance of supply and demand."
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