Eurozone manufacturing activity expanded at the fastest pace in nearly four years in April as factories rushed to build safety stocks ahead of expected price rises and supply shortages linked to the Middle East war, S&P Global reported on May 4.

The S&P Global Eurozone Manufacturing PMI rose to 52.2 from 51.6 in March, a 47-month high. The output index climbed to an eight-month peak of 52.3, marking expansion in 13 of the past 14 months. New orders grew at the sharpest rate in four years, while new export orders rose for the first time in just over four years.

All eight euro area countries covered by the survey posted readings above the 50.0 no-change mark for the first time since June 2022. Ireland led the upturn, followed by the Netherlands. France and Italy recorded their sharpest expansions since the first half of 2022, Spain returned to growth, and Germany saw a slight slowdown from March.

Survey respondents repeatedly cited front-loaded purchasing by clients seeking to get ahead of price increases and possible supply disruption from the war-induced energy and supply shock. Factory buying volumes rose at the fastest pace since mid-2022, putting fresh strain on supply chains. Vendor delivery times lengthened to the worst extent since July 2022, with bulk ordering, war-related logistical disruption and reduced raw material availability cited as drivers.

Input price inflation jumped to a 46-month high, with the seasonally adjusted Input Prices Index rising 19 points since February. Output charge inflation accelerated to a 39-month record as firms passed on costs to customers.

Pre- and post-production inventories continued to fall, though at slower rates than in March. Manufacturing employment dropped for almost three years running, despite a build-up in backlogs of work. Business optimism slumped to its lowest since November 2024.

"Although the PMI has risen to its highest for nearly four years, the survey is more a cause for alarm than celebration," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

"Production and orders books are being buoyed by the building of safety stocks as a result of widespread concerns over supply shortages and rising prices emanating from the war in the Middle East.

Manufacturers' optimism about the year ahead has sunk to its gloomiest for nearly one-and-a-half years, the war having shattered the growing confidence that had been building earlier in the year."