European factories on a hiring binge as orders go up

[FRANKFURT]

EURO-area factories are hiring new workers at record pace to keep up with persistently strong orders.

Job creation was particularly pronounced in Germany and Austria last month, said an IHS Markit survey of purchasing managers. Manufacturers continued to face substantial supply-chain bottlenecks and passed on rising costs to customers.

With economies around the world recovering from the Coronavirus pandemic, Europe's factories are running at full steam. Businesses in north Asia are also benefiting from rising global demand, while a slump in activity in South-east Asia - currently seeing one of the world's worst Covid-19 outbreaks - serves as a reminder of how quickly the crisis can flare up again.

Still, confidence in the outlook for the euro area is running high. A gauge measuring economic sentiment rose to the highest level since at least 1985, a separate survey found.

The International Monetary Fund (IMF) has raised its economic forecasts for the 19-nation region, predicting that momentum in the bloc's four largest economies will pick up in the coming months. The European Central Bank (ECB) is bracing for a "strong" increase in output in the current quarter, though it has also warned that resurgent infections and supply constraints risk damping the recovery.

"Manufacturers and their suppliers are struggling to raise production fast enough to meet demand, driving prices ever higher," said Chris Williamson, an IHS Markit economist. "Capacity constraint indicators continue to flash red." New orders jumped last month, fuelling a considerable increase in backlogs of work. Widespread shortages of materials and poor transport availability produced record gains in input costs and selling prices.

BLOOMBERG