Nomura analysts note that April Euro area PMIs point to stagflation risks as activity softens while price indices jump to highs last seen in 2022/23. The Euro area composite PMI fell below 50, driven by weaker services, while manufacturing showed resilience, with firms apparently advancing purchases as they brace for Iran war-related supply and energy shocks.

Stagflation fears as prices accelerate

"European PMIs for April highlight stagflation risks, with price indices rising across the board to levels not seen since 2022/23."

"Euro area PMI output indices generally revealed weakening activity; however, the manufacturing industry was surprisingly resilient."

"Most concerning in the April data were large moves higher in price PMIs across Europe, related to higher energy prices from the Iran war."

"There was a 3.2pt rise in the euro area composite PMI output price index to 57.0 (its highest since early 2023) and a 3.1pt increase in the composite PMI input price index to 68.4, with larger rises in the manufacturing PMI price indices than the services PMI price indices."

"The moves higher in output price indices are larger than occurred in March, suggesting businesses are passing higher costs on to customers more."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)