Energy prices push eurozone production costs sharply higher

Eurozone manufacturing growth accelerated to its strongest level in almost four years in March, with the S&P Global purchasing managers’ index rising to 51.6. The improvement was driven largely by supply chain disruptions linked to the war in the Middle East, which lengthened delivery times and temporarily boosted activity indicators.

However, underlying demand remains weak. Although the sub-index for new orders rose to a multi-month high, growth was modest. Output increased for the third consecutive month, while export orders stabilised after a prolonged decline.

At the same time, the conflict has pushed up input costs significantly, chiefly due to higher oil and energy prices. Cost inflation has reached its highest level since late 2022, and producers are passing this on to customers, with prices rising at their fastest pace in more than three years. Analysts say this is eroding the euro area’s competitiveness.

Despite the uptick in activity, sentiment in the sector remains subdued, with business confidence falling to a five-month low. Germany and Italy performed best, while Spain declined and France stagnated.

(reuters, max)