Eurozone factories struggled in May as consumers turned to leisure activities

LONDON, June 1 (Reuters) – Manufacturing growth in the euro zone slowed last month as factories faced supply shortages, high prices and falling demand, a survey has found that suggests consumers redirect their spending towards tourism and leisure.

S&P Global’s final Manufacturing Purchasing Managers’ Index (PMI) fell to 54.6 in May from 55.5 in April, its lowest since November 2020, but edged ahead of a preliminary reading of 54.4. Anything above 50 indicates growth.

An index measuring production, which feeds a composite PMI expected on Thursday and considered a good indicator of economic health, fell from 50.7 to 51.3.

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“Eurozone manufacturers continue to battle headwinds of supply shortages, elevated inflationary pressures and weakening demand amid growing uncertainty about the economic outlook,” said Chris Williamson, Chief Economist at S&P Global.

“However, the deteriorating health of the manufacturing sector has also been exacerbated by the shift in demand towards services.”

A worker assembles a vehicle at the Knaus-Tabbert AG factory in Jandelsbrunn near Passau, Germany, March 16, 2021. REUTERS/Andreas Gebert

As economies reopened after the coronavirus pandemic, citizens are once again enjoying vacations and recreational activities, S&P Global said.

The May services flash PMI, however, fell to 56.3 from 57.7, suggesting that growth has slowed in this sector as well. Read more

Supply chains barely recovered from the pandemic have meanwhile been damaged by the war in Ukraine and factories have to pay higher costs for the raw materials they need, some of which they have passed on to consumers, weakening demand.

Euro zone inflation hit a record high of 8.1% in May, official data showed on Tuesday and the PMI for new orders fell to 48.7 last month from 51.6, its first time under the break-even point of 50 since June 2020. read more

“A major driver of the first decline in new orders in nearly two years has been the supply crisis and accompanying price pressures, with producers of many goods and commodities once again ramping up their prices alongside a recent spike in energy prices,” Williamson said.

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Reporting by Jonathan Cable; Editing by Catherine Evans

Our standards: The Thomson Reuters Trust Principles.

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