Manufacturing falls, but supply chains are calm

Author: Konrad Potocki

Economists are confused by the latest PMI Index data, which records the investment sentiment of the economy. They show that the economic recovery in Europe is gaining momentum.

The problem, however, is that the market data are ambiguous. Although the PMI index has risen above the magic 50-point mark (54.4), the slowdown in manufacturing continues to deepen. Although, as Reuters reassures, supply chains have not collapsed, there is a growing gap between the rapidly growing service sector and the manufacturing sector. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, among others, points this out. At the same time, the expert adds that, despite all the discrepancies, the PMI Index shows a ”very friendly overall picture of the European economy”.

The PMI Index surveys the mood of purchasing managers for their companies. The Purchasing Managers Index shows the activity of managers who purchase various goods and services in the market. It is assumed that an Index value above 50 points indicates economic growth and heralds prosperity, while a value below this indicates less market optimism and shrinking purchases. The published results refer to the euro area. 

We would add that the March PMI results were also encouraging. – Eurozone economic activity growth accelerated to a 10-month high in March, another sign that the economy is recovering from last year’s declines. Inflationary pressures continued to ease, and industry even saw a sharp drop in costs, experts wrote in the S&P Global report. Supply chain executives also confirm a modest recovery, but advise holding off on excessive optimism until at least the end of May.