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01 Feb 2021 | 10:31

Eurozone manufacturing holds up despite fresh Covid curbs

(Sharecast News) - The recovery across the eurozone's manufacturing sector continued in January, industry data showed on Monday, despite the introduction of fresh lockdown measures. The final IHS Markit eurozone manufacturing purchasing managers' index for January was 54.8, down on December's figure of 55.2 and a touch above the provisional estimate of 54.7.

It was the seventh month of growth, however, with the reading still among the highest seen over the past two and a half years, IHS Markit noted. A reading above the neutral 50.0 mark indicates growth, while one below suggests contraction.

Within individual member states, Germany and the Netherlands were two of the strongest performers, with readings of 57.1 and 58.8 respectively. The Dutch figure was the highest for 28 months although the figure for Germany - the bloc's biggest economy - was a four-month low. Italy also performed strongly, reaching a 34-month high of 55.1.

Spain's PMI, however, dipped below 50.0 to 49.3, hit by both Covid-19 restrictions and Storm Filomena.

Chris Williamson, chief business economist at IHS Markit, said: "Eurozone manufacturing output continued to expand at a solid pace at the start of 2021, though growth has weakened to the lowest since the recovery began, as new lockdown measures and supply shortages pose further challenges to producers across the region.

"At the moment, manufacturing is providing an important support to the economy as the service sector is hit by Covid-19 restrictions, but this support is waning. Consumers goods producers in particular are struggling.

"While future prospects brightened, with manufacturers' optimism striking a three-year high in January to sound a reassuring note of confidence at the start of the year, any potential delays to the vaccine roll-outs will add an additional layer of uncertainty to the outlook."

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "The sustained upturn in production and new orders pushed up work backlogs further, which is now posing an issue, in the context of intensifying supply-side disruptions, especially in relation to sourcing inputs from Asia.

"The trend drove up input price inflation further, and while selling price inflation rose in sympathy, margins are now under pressure."
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