French Services Rebound, German Factories Face Supply Squeeze

French services returned to growth in April while German manufacturing — the driver behind Europe’s nascent recovery — softened amid supplier delivery delays.

Purchasing managers’ indexes from the euro area’s two largest economies showed businesses were confident at the start of the second quarter that they’ll soon be able to put the pandemic crisis behind them, even as lockdowns persist amid continuously high infections.

“The short-term outlook is continuing to strengthen for French businesses,” said IHS Markit economist Eliot Kerr. “Previously growth had remained elusive due to an ongoing decline in the service sector.”

France’s services PMI rose to an 8-month high in April, while a tightening of coronavirus restrictions in Germany curbed a rebound in the sector that had started in March.

German factories, meanwhile, saw their order stock increase at the fastest pace in a decade. Shortages of raw materials and freight capacity pushed up input costs to the highest since 2011 and output prices to strongest in more than two years.