2023-08-01 20:46:25
Economic surveys showed, on Tuesday, that global factory activity remained stagnant in July, in an indication that slowing growth and weakness in China’s economy are hurting the global economy, but the picture in the Americas is much less bleak than in other regions, according to Archyde.com.
The downward trend highlighted the dilemma of policymakers who have embarked on bold courses of tightening in the battle to rein in inflation but still have to try to avert a possible recession.
The Standard & Poor’s Global index of manufacturing activity around the world remained flat at 48.7 in July, matching the lowest level since June 2020, with sub-indices of factory production and new orders dropping to their lowest levels in six months. Any reading of the index below fifty means deflation.
A purchasing managers’ index covering the eurozone as a whole showed manufacturing activity contracted in July at the fastest pace since the height of the Covid crisis, as demand fell despite factories cutting their prices sharply.
European manufacturing is slowing
Germany, the largest economy in Europe, witnessed a significant weakness, and France and Italy, the second and third largest economies in the euro area, recorded a noticeable deterioration since June.
The final reading of the Hamburg Commercial Bank’s purchasing managers’ index for the eurozone manufacturing sector issued by Standard & Poor’s Global fell to 42.7 in July from 43.4 in June, the lowest reading since May 2020, and the reading matched the preliminary figure.
An index measuring output, an indicator that influences the composite PMI due out on Thursday and is seen as a good gauge of the state of the economy, fell to 42.7 from 44.2, reaching a low not seen in more than three years.
The data showed that the slowdown in manufacturing in Germany worsened at the beginning of the third quarter following producers of goods recorded a sharper drop in new orders.
Meanwhile, the French factory sector contracted further in July, although the decline was not quite as bad as initially expected.
“Today’s PMI results are evidence of the ongoing uncertainty that the manufacturing sector in the eurozone is currently facing,” said Thomas Rehn, a senior officer at management consultancy Accenture.
He added, “Demand is going through a difficult stage. The decline in production, coupled with the indirect effects of inflation, labor shortages and changing customer preferences, are all putting pressure on companies.”
In Britain, which is outside the European Union, factory output contracted in July at the fastest pace in seven months, affected by higher interest rates and fewer new orders, although price pressures eased.
Asia
Surveys showed that Japan, South Korea, Taiwan and Vietnam saw a contraction in manufacturing activity in July, highlighting the pressure that slowing Chinese demand is putting on the region.
China’s Caixin/S&P Global Manufacturing Purchasing Managers’ Index fell to 49.2 in July from 50.5 in June, missing analyst expectations for a reading of 50.3 and marking the first drop in activity since April.
The data coincided with the official reading of the Purchasing Managers’ Index released by the government on Monday, adding to challenges for policymakers seeking to fuel the momentum of China’s post-COVID recovery.
“Manufacturing PMIs remained on a contracting trend in most emerging Asia last month and the fundamental data points to further weakness ahead,” said Shivan Tandon, emerging markets Asia expert at Capital Economics.
“Declining new orders, a gloomy employment outlook and high inventory levels suggest lower factory activity in the coming months,” he added.
Expectations indicate a slowdown in factories in the coming period
The Jibbon Bank Japan Purchasing Managers’ Index fell to 49.6 in July from 49.8 in June due to weak domestic and external demand.
A survey by Standard & Poor’s Global showed that the purchasing managers’ index in South Korea reached 49.4 in July, up from 47.8 in June, but it remained below the threshold of fifty.
Surveys showed that Taiwan’s manufacturing purchasing managers’ index fell to 44.1 in July, down from 44.8 in June, while Vietnam’s index rose to 48.7, up from 46.2.
In India, growth in manufacturing activity slowed for the second month in a row, but the pace of expansion remained healthy and better than expected.
In revised estimates released in July, the International Monetary Fund expected growth in emerging Asian economies to accelerate to 5.3 percent this year, from 4.5 percent in 2022.
The fund predicted that the Chinese economy would expand 5.2 percent this year, following increasing 3.0 percent in 2022.
Relative stability in the Americas
In contrast to Asia and Europe, factory activity in the United States, Canada, Brazil and Mexico has been more stable. Activity in Mexico, in fact, bucked the broader contraction trend and grew at the highest level in seven years, with an improvement in output and new orders detected.
Meanwhile, the US manufacturing sector appears to be stable at weaker levels, but amid a gradual improvement in new orders while factory employment fell to a three-year low indicating an acceleration in layoffs.
The Institute for Supply Management in the United States said today, Tuesday, that its manufacturing purchasing managers’ index rose to 46.4 last month, from 46 in June, which was the lowest reading since May 2020.
PMI numbers for Canada and Brazil are close to the break-even point of 50.
Canada’s PMI came in at 49.6 with output expanding slightly, at the highest rate since February. In Brazil, activity contracted for the ninth month in a row but the country’s PMI came in at the highest level since February with a reading of 47.8.
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