An exceptionally high number of Eurozone companies plan to raise selling prices. It is unlikely that, at this stage, unit labour cost growth would already be a key driver. Rising input costs and strong demand are playing a crucial role, whereby well-filled order books make it easier for companies to increase their prices. Selling price expectations of euro area companies are much higher than what would be expected based on their historical relationship with input prices and order book levels. It seems that when more companies are raising prices, others will be inclined to do the same. This broad-based nature of the increase of inflation could slow down the reaction of inflation to slower demand growth.
The global manufacturing PMI has declined slightly in March after a brief and limited rebound in February. It is at its lowest level for this year. In the US however, the upward trend continues whereas the Eurozone saw a significant decline. Within the Eurozone, Ireland was an exception and the index has rebounded to its January level. Japan, Mexico, South Africa and in particular Brazil saw an improvement in March. China and Vietnam recorded significant declines.
Rising inflation has eroded household confidence in Spain, which in March reported the sharpest drop since the European Commission’s statistical series began in July 1986. So far, business confidence is holding up better according to PMI and European Commission surveys. Yet there are clear signs of an economic slowdown to come: the new orders component of the PMI index has declined due to a sharp deterioration in external demand. Another notable change is the extension of goods delivery times in the manufacturing sector (the PMI index was down 9.1 points to 22.4). It is now at approximately the same level as in November 2021, the worst month on record for the current statistical series.
The Covid-19 pandemic slowed worldwide for the second consecutive week, with a significant 14% decline in the number of new cases reported between 31 March and 6 April compared to the previous week. New fact to notice: this improvement benefitted all regions (chart 1): South America and Africa (-27%), Asia (-20%), Europe (-11%) and North America (-5%). Meanwhile, vaccination campaigns continue to progress. To date, 11.4 billion doses of the vaccine have been administered worldwide, bringing to 65% the share of the global population that has received at least one dose of the Covid-19 vaccine.
