A nascent easing of supply bottlenecks helped drive manufacturing activity in Europe’s two largest economies in January, at least partially offsetting the drag from tighter restrictions linked to a surge in coronavirus cases.
In Germany, private-sector output unexpectedly rose to a four-month high, with both manufacturing and services activity expanding by more than economists predicted, according to IHS Markit surveys. French growth didn’t hold up as well, though a roughly stable performance by industry helped to partially offset services touching a nine-month low.
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“Manufacturing is expected to stage a recovery in 2022 as supply bottlenecks ease, but seeing growth of this speed already is a welcome development,” said Phil Smith, economics associate director at IHS Markit. “The drag on production from supply-chain issues looks to have eased further, although there is still a lot of room for improvement on this front.”
While calling Germany’s services numbers a “positive surprise,” he warned that rising costs remain a key concern for businesses.
France has taken a more lenient approach to the latest wave of coronavirus cases, but the economic impact was still apparent as workers isolated after contracting the virus, restraining many firms, IHS Markit said.
The reports come amid rising pressure for the European Central Bank to respond to soaring prices in the region, with peers elsewhere acting more aggressively in withdrawing pandemic stimulus. Officials in the euro area still expect inflation to slow over the course of this year and for the recovery to pick up speed once the current wave of infections moderates.
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A nascent easing of supply bottlenecks helped drive manufacturing activity in Europe’s two largest economies in January, at least partially offsetting the drag from tighter restrictions linked to a surge in coronavirus cases.
In Germany, private-sector output unexpectedly rose to a four-month high, with both manufacturing and services activity expanding by more than economists predicted, according to IHS Markit surveys. French growth didn’t hold up as well, though a roughly stable performance by industry helped to partially offset services touching a nine-month low.
​
“Manufacturing is expected to stage a recovery in 2022 as supply bottlenecks ease, but seeing growth of this speed already is a welcome development,” said Phil Smith, economics associate director at IHS Markit. “The drag on production from supply-chain issues looks to have eased further, although there is still a lot of room for improvement on this front.”
While calling Germany’s services numbers a “positive surprise,” he warned that rising costs remain a key concern for businesses.
France has taken a more lenient approach to the latest wave of coronavirus cases, but the economic impact was still apparent as workers isolated after contracting the virus, restraining many firms, IHS Markit said.
The reports come amid rising pressure for the European Central Bank to respond to soaring prices in the region, with peers elsewhere acting more aggressively in withdrawing pandemic stimulus. Officials in the euro area still expect inflation to slow over the course of this year and for the recovery to pick up speed once the current wave of infections moderates.