Goldman Sachs analysts have identified pronounced supply pressures in major European economies following the release of Thursday's flash PMI data. The headline Euro Area composite PMI registered 48.6, missing the consensus of 50.1 and signaling a contraction in aggregate activity. By contrast, the UK composite PMI came in at 52.0, above the consensus of 49.8, extending the trend of relatively stronger UK performance in 2026.
The bank's note emphasizes that both the Euro Area and the UK are now experiencing clear signs of supply stress. Key manufacturing indicators show higher input prices and longer supplier delivery times - a pattern observed for the second month running. Goldman Sachs highlights that the ratio of output price increases to input price rises is around half, a level comparable to the post-Covid period.
Price inflation and the lengthening of delivery times were especially marked in the UK PMI data. The economists cautioned that the percent-balance style indices reported in the PMIs mainly capture the breadth of these pressures across firms rather than their absolute intensity.
Breaking down activity, the Euro Area registered a notable decline in activity components after more than a year of stability in the composite series. That deterioration in activity was, however, smaller than the shifts seen in price and supplier delivery measures. Expectations components across both economies displayed similar directional patterns to the activity measures.
The PMI release also noted behavioural responses from businesses: some firms appear to be front-loading orders and building stocks in anticipation of rising costs and potential supply disruptions. That stock-building likely provided support to reported activity levels. Separately, sharp increases in supplier delivery times have mechanically added to headline manufacturing indices, which in turn helped cushion those indices from larger declines.
Goldman Sachs concludes that forthcoming economic data will be important to monitor how these supply-side strains and the ongoing energy shock translate into regional growth outcomes and further disruptions. The analysts underscore that tracking both price and delivery-time measures will be crucial for assessing the transmission of supply pressures into activity and inflation dynamics.
Summary
Flash PMI readings show the Euro Area sliding into contraction territory while the UK posts unexpectedly stronger composite activity. Both regions report rising input costs and slower supplier deliveries for a second consecutive month, with evidence of stock-building ahead of anticipated disruptions.
Key points
- Euro Area composite PMI fell to 48.6 versus an expected 50.1, indicating contraction in aggregate activity.
- UK composite PMI rose to 52.0, beating the 49.8 consensus and extending comparatively stronger UK performance in 2026.
- Manufacturing input prices and supplier delivery times increased in both regions for the second month running; the ratio of output to input price rises is roughly half, matching post-Covid levels.
Risks and uncertainties
- Supply disruptions - ongoing lengthening of supplier delivery times could further impair manufacturing output and inventories.
- Energy shock - continued energy-related pressures may propagate through input costs and production constraints.
- Activity divergence - the weaker Euro Area activity readings relative to the UK create uncertainty for regional growth patterns.