Euro zone factory downturn deepened in March

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Activity at struggling factories across the euro zone fell further last month as consumers feeling the pinch from rising living costs cut back, according to a survey which did show the cost of manufacturing fell for the first time since mid-2020.

S&P Global's final manufacturing Purchasing Managers' Index (PMI) fell to 47.3 in March from February's 48.5, just ahead of a preliminary reading of 47.1 but below the 50 mark separating growth from contraction for a ninth month.

An index measuring output, which feeds into a composite PMI due on Wednesday that is seen as a good guide to economic health, did however rise to a 10-month high of 50.4 from 50.1.

"Euro zone manufacturing remains in troubled waters, with factories reporting a fall in demand for goods for an eleventh straight month amid the surging cost of living, tighter monetary policy, a shift to inventory destocking and subdued customer confidence," said Chris Williamson, chief business economist at S&P Global.

Lower energy costs and healing supply chains did however mean input prices fell for the first time since July 2020 - just when the coronavirus pandemic was cementing its grip on the world. The sub-index sank to 46.8 from 50.9.

That drop allowed factories to increase their charges at the slowest pace in over two years, likely welcome news to policymakers at the European Central Bank who have so far failed to get inflation anywhere near their 2 percent target.

"These lower costs are feeding through to slower increases in selling prices, which should in turn feed through to lower prices paid for goods by consumers," Williamson said.

Despite having embarked on the most aggressive tightening of monetary policy in the central bank's history, prices rose 6.9 percent last month, official data showed on Friday.

After delivering an expected 50 basis point increase to interest rates last month a Reuters poll suggested the ECB would follow through with 25 basis points lifts at its May, June and July meetings.

Euro zone factory downturn deepened in March

Eurozone

Factory

Downturn

Deepened

March

PMI

Manufacture

Activity

Struggling