LONDON, April 1 (Reuters) - Euro zone manufacturing growth bounced to its strongest in nearly four years in March as supply chain disruptions inflated growth figures although underlying demand
Euro zone factories see jump in input costs, supply snags, survey shows
Euro Zone Manufacturing Faces Supply Chain Disruptions and Rising Costs
Impact of Middle East Conflict on Supply Chains
LONDON, April 1 (Reuters) - Euro zone manufacturers faced soaring input costs and supply chain disruptions in March due to the Iran war, even as underlying tepid demand threatened to undermine the sector's fragile recovery, a survey showed.
The conflict in the Middle East has disrupted global logistics networks, causing delivery delays and pushing input price inflation to its highest levels since October 2022, distorting headline growth measures.
Rising Input and Energy Costs
A jump in the cost of manufacturing, driven by higher oil and energy prices, led manufacturers to respond by raising selling prices at the fastest pace in just over three years.
Expert Insights on PMI Distortions
"It's exactly the same as during the pandemic - this is a supply shock - normally longer delivery times are associated with too much demand in a really healthy environment but in a supply shock it falsely elevates the PMI," said Chris Williamson, chief business economist at S&P Global.
"It does falsely elevate the PMI so conditions would be worse than the headline PMI indicates," he also said.
Survey Results and Key Indicators
The S&P Global euro zone Manufacturing Purchasing Managers' Index rose to 51.6 in March from 50.8 in February, higher than a preliminary estimate of 51.4.
A reading above 50.0 indicates growth in activity.
Demand and Production Trends
The new orders sub-index - a key gauge of demand - matched February's 46-month high but growth remained modest.
Production rose for a third consecutive month, with the output sub-index edging up to 52.0 from 51.9 in February, marking a seven-month high.
New export orders stabilised after contracting for eight straight months, providing some relief to manufacturers.
Labour Market and Business Confidence
Backlogs of work increased for the first time since mid-2022, signalling capacity pressures, yet companies cut jobs at a faster rate in March.
Business confidence slipped to a five-month low and remained below its long-term average as the conflict weighed on sentiment.
Country-Level Performance
Germany and Italy recorded their strongest readings in 46 and 37 months respectively, while Spain was the only country in contraction territory. Greece posted the highest reading, followed by Ireland, while France's manufacturing sector stagnated.
(Reporting by Jonathan Cable; Editing by Hugh Lawson)
