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Eurozone Manufacturing Growth Slows Amid Geopolitical Tensions

Eurozone manufacturing sector registered its slowest growth in 14 months in March as geopolitical tensions weighed on demand and confidence, survey results from S&P Global showed on Friday.

The manufacturing Purchasing Managers’ Index fell to 56.5 in March from 58.2 in February. The score was also below the flash estimate of 57.0.

This was the slowest growth faced by producers since the beginning of 2021.

The survey showed that amid surging commodity, fuel and energy costs, input price inflation re-accelerated to a four-month high. To offset margin pressures, eurozone manufacturers raised their charges to the greatest extent in the series history.

Growth momentum in new orders eased notably as geopolitical tensions led to increased hesitance among clients. Export demand declined during March for the first time since June 2020.

The survey showed a significant decline in business confidence in March. Manufacturing employment grew at a pace stronger than the series average, but the weakest since February 2021.

Heightened risk aversion among both manufacturers and their customers due to the uncertainty caused by the invasion, combined with an intensifying cost of living crisis, meanwhile threatens to pull growth even lower in the coming months, Chris Williamson, chief business economist at S&P Global said.

According to S&P survey, rates of expansion slowed in all major eurozone economies in March.

Reflecting the impact of the war in Ukraine, Germany’s manufacturing growth hit an 18-month low. The PMI dropped to 56.9 in March from 58.4 a month ago. The flash score was 57.6.

At the same time, France’s manufacturing PMI fell to 54.7 in March from 57.2 in the prior month. The reading was slightly below the flash 54.8.

Italy’s manufacturing growth was curtailed by ongoing supply chain issues and material shortages. The factory PMI came in at 55.8, up from 58.3 in February. The reading was forecast to fall moderately to 57.0.

Likewise, Spain’s manufacturing sector continued to expand in March but at a slower pace. The manufacturing PMI dropped to 54.2 in March from 56.9 in April. This was the lowest reading for over a year.

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