Eurozone factories boost output as raw materials surge

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The factory activity of the Eurozone posted a record pace of growth in June but managers warned of record surge in costs of input materials, Reuters reported quoting official EU statistics data. The rise in prices of raw materials proves to be strongest in almost twenty years. During the Covid -19 lockdowns across the EU government restrictions led to a devastating slump in the dominant service sector but the industrial plants largely continued to operate.

With the reopening of economies on the back of a drop in Covid-19 cases the overall markets posted an additional increase in demand which further stimulated the industry sector.

IHS Markit's final manufacturing Purchasing Managers' Index (PMI) in June rose to 63.4 from 63.1 in May exceeding expectations. "Eurozone manufacturing continued to grow at a rate unbeaten in almost 24 years of survey history in June as demand surged with the further relaxation of Covid-19 containment measures," said Chris Williamson, chief business economist at IHS Markit. "However, the sheer speed of the recent upsurge in demand has led to a sellers' market as capacity and transportation constraints limit the availability of inputs to factories, which have in turn driven industrial prices higher at a rate not previously witnessed by the survey."

Due to a shortage of shipping containers and supply chains hugely affected by the global pandemic, the input prices index soared to 88.5 from 87.1, which is by far the highest in the survey's history. Inflation dipped to 1.9% last month, official flash data showed. After a slow start, vaccine programmes are accelerating in the bloc so optimism improved and to meet strong demand, factories increased headcount at the fastest rate since the survey began. The Eurozone economy was expected to grow 4.2% this year as life starts to return to normal.

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