Euro zone factory growth stayed strong in Dec as supply issues eased

LONDON: Manufacturing activity in the euro zone remained resilient at the end of 2021 as factories took advantage of an easing in supply chain bottlenecks and stocked up on raw materials at a record pace, a survey showed.

The global coronavirus pandemic had left factories struggling to get the materials they need and sent costs soaring, but a tentative easing of the supply issues led to a marked decrease in price pressures.

IHS Markit's final manufacturing Purchasing Managers' Index (PMI) dipped to 58.0 in December from November's 58.4, matching an initial "flash" estimate and still comfortably above the 50 mark separating growth from contraction.

An index measuring output, which feeds into a composite PMI due on Wednesday and seen as a good guide to economic health, held steady at November's 53.8.

"It has been an incredibly challenging period for euro zone manufacturers this second half of 2021, but the latest survey data hasn't spoiled the festive cheer too much," said Joe Hayes, senior economist at IHS Markit.

"We're seeing some tentative, but very welcome signs that the supply chain crisis which has plagued production lines all across Europe is beginning to recede. Although what gains to be had were only marginal ... PMI data showed stocks of purchases rising at a survey-record rate in December" That easing meant the input prices index sank to an albeit still high eight-month low of 86.7 from 88.9, allowing factories to raise their prices at a much slower pace than in November.

"Easing inflation rates are again a welcome sign, but we're still in hot territory," Hayes added.

The European Central Bank https://www.reuters.com/markets/rates-bonds/ecb-set-dial-back-stimulus-one-more-notch-2021-12-15 took another small step in rolling back crisis-era stimulus last month but raised its inflation projections and now sees it at 3.2% this year, well above its 2.0% target.- Reuters