Goldman Sachs warns of supply pressures in European economies

Investing.com -- Goldman Sachs analysts highlighted significant supply pressures emerging in European economies following Thursday's flash PMI data release, with the Euro Area composite PMI falling to 48.6 against expectations of 50.1.

The UK composite PMI reached 52.0, surpassing the consensus forecast of 49.8, extending a trend of stronger UK economic performance compared to the Euro Area in 2026.

Goldman Sachs noted that both economies are experiencing clear supply pressures, with higher manufacturing input prices and longer supplier delivery times marking the second consecutive month of such trends. The ratio of output price rises to input price rises stood at approximately half, matching levels seen during the post-Covid period.

Price increases and delivery time extensions were particularly pronounced in the UK data. Goldman Sachs economists stated that these percent-balance indices generally measure the breadth of pressures rather than their overall intensity.

Activity components showed a notable decline in the Euro Area after over a year of stability in the composite index, though the drop was smaller than changes in price and delivery time measures. Expectations components for both economies showed similar patterns.

The PMI release notes indicated some front-loading and stock-building ahead of anticipated price increases and supply disruptions, which likely supported activity data. Sharp increases in supplier delivery times contributed positively to headline manufacturing indices, helping to cushion them.

Goldman Sachs stated that economic data will be crucial for tracking regional growth impacts and supply disruptions stemming from the ongoing energy shock.

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