European manufacturers are increasingly strained by global supply-chain problems that are pushing up prices and could last well into next year.
A gauge by IHS Markit measuring business activity in manufacturing fell last month by the biggest margin since April last year — the beginning of the COVID-19 pandemic. Growth in new orders, output and employment slowed considerably.
“Supply issues continue to wreak havoc across large swathes of European manufacturing, with delays and shortages being reported at rates not witnessed in almost a quarter of a century and showing no signs of any imminent improvement,” IHS Markit chief business economist Chris Williamson said in a statement.
Photo: EPA-EFE
Price pressures remained close to record levels, and companies passed on rising production costs to customers at a faster rate to protect their profit margins.
European-area inflation is expected to have quickened to above 3 percent last month, well exceeding the European Central Bank’s 2 percent target. While most officials insist that the spike is temporary, lasting supply-chain problems are seen as a key risk that could entrench higher price growth.
Reports from Asia give room for some optimism that bottlenecks could soon be cleared. Manufacturing activity there rebounded last month after COVID-19’s grip on several countries loosened, allowing the easing of lockdown measures that had shut down factories.
Activity in Asia’s manufacturing sector stagnated broadly last month as pandemic-induced factory shutdowns and signs of slowing Chinese growth weighed on the region’s economies, surveys showed yesterday.
Countries where large outbreaks of the Delta variant of SARS-CoV-2 receded saw an improvement in activity, such as Indonesia and India.
However, factory activity last month shrank in Malaysia and Vietnam, and grew in Japan at the slowest rate in seven months, as chip shortages and supply disruptions added to the woes of a region still struggling to shake off the hit from the pandemic.
China’s waning economic momentum dealt a fresh blow to the region’s growth prospects, with the official Purchasing Manager’s Index on Thursday showing that the country’s factory activity unexpectedly shrank last month due to wider restrictions on electricity use.
“While coronavirus curbs on economic activity may be gradually lifted, the slow pace at which this will happen means Southeast Asian economies will stagnate for the rest of this year,” NLI Research Institute economist Makoto Saito said.
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