Business growth across Europe fell to a six-month low in October as supply chain bottlenecks and logistic issues related to the pandemic pushed input prices to rise at their fastest rate in two decades.
Government restrictions are being lifted across the European trading bloc but shortages of raw materials in the manufacturing sector are impacting growth and the pent-up demand unleashed across the services industry is waning.
IHS Markit's Flash Composite Purchasing Managers' Index (PMI), a gauge of overall economic health, fell to a six-month low of 54.2 in October from 56.2 in September.
The services PMI index also fell to a six-month low of 54.6 in October, a notch lower than the preliminary estimate of 54.7 but still comfortably above the 50 mark separating growth from contraction.
Demand weakened though and the new business index dropped to 55.1 from 55.3.
While European manufacturing activity remained strong last month, it was curtailed by supply chain bottlenecks. Those bottlenecks have caused the costs of raw materials to soar and the composite input prices index climbed to 73.2 from 70.9, by far the highest since the survey began in mid-1998.
The supply constraints meant growth slowed in Germany, Europe's largest economy, for a third month and it was a similar picture in France, Spain and Italy.
In Britain, which is now outside the currency union, businesses reported faster growth, but the Bank of England is likely to be worried about record rises in the costs faced by businesses, which are being passed onto consumers.
The Bank of England will deliver its most eagerly awaited policy decision in years later today (November 4). The central bank must choose whether to raise interest rates from an all-time low or say it is waiting to ensure the post-lockdown economy is ready for a rate increase.
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