A surge in factory output is testing already strained global supply chains, raising prices of raw materials and other inputs at the fastest pace in a decade as manufacturers and their customers are forced to wait longer for their goods to arrive.
The recovery in global factory output from a pandemic-driven collapse started in May, and output had returned to its pre-lockdown level by December, faster than many had expected, including manufacturers themselves.
But with output continuing to rise above pre-pandemic levels, manufacturers in most countries report lengthening delivery times for raw materials and other inputs, as well as increasing backlogs of work they themselves have yet to complete, and a sharp pickup in input prices.
In Germany, one of the world’s manufacturing powerhouses, one of a number of surveys carried out by data firm IHS Markit recorded the sharpest increase in output since the series began in 1996. That is good news for the European economy, which continues to be held back by rising infections and a faltering vaccination campaign.
Over the past six months, Europe’s economy has moved at two speeds. While manufacturing has expanded at an increasingly rapid pace, activity in the larger services sector has declined. Overall, from October to February there was a contraction in output that likely saw the eurozone slide into recession during the final quarter of last year and the first quarter of this.
