Euro-Area Business Activity ‘Markedly’ Slows Amid Supply Strains
Business activity in the euro area “markedly” lost momentum in September after demand peaked over the summer and supply chain bottlenecks hurt both services and manufacturers.
Surveys of purchasing managers by IHS Markit showed growth in both sectors slowing more than expected, bringing overall activity to a five-month low. Input costs, meanwhile, surged to the highest in 21 years, according to the report.
“Firms have become increasingly frustrated by supply delays, shortages and ever-higher prices for inputs,” said Chris Williamson, chief business economist at IHS Markit. “Businesses, most notably in manufacturing but also now in the service sector, are being constrained as a result, often losing sales and customers.”
The figures underscore the conundrum faced by policy makers in the region, as they balance keeping borrowing costs low to support the recovery, while price spikes hamper production. Growth slowed especially sharply in Germany and France, IHS Markit said.
At the same time, coronavirus infections are also on the rise again, as are concerns over how that might affect the recovery and already-severe supply constraints.
“Concerns over high prices, stressed supply chains and the resilience of demand in the ongoing pandemic environment has consequently eroded business confidence, with expectations for the year ahead now down to the lowest since January,” Williamson said.
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