Economic Contraction

Global factory growth stagnates in June, fueling recession fears

Factory growth around the world stalled in June as higher prices and a bleaker economic outlook made consumers wary of shopping, while China’s strict COVID-19 lockdowns 19 and Russia’s invasion of Ukraine added to supply chain disruptions, according to surveys.

Economic slowdown risks in Europe and the United States have heightened fears of a global recession and markets fear that aggressive interest rate hikes in the United States to combat soaring inflation could push the countries into recession and reduce global demand.

“Between central banks scrambling to counter inflation and growing fears, there is absolutely no path to a soft landing for the global economy, there are few or no places to hide” , said Stephen Innes of SPI Asset Management.

Euro zone manufacturing output fell last month for the first time since the first wave of the pandemic two years ago. S&P Global’s final Manufacturing Purchasing Managers’ Index (PMI) fell to 52.1 in June from 54.6 in May, its lowest since August 2020.

An index measuring production that feeds a composite PMI expected on Tuesday and considered a good indicator of economic health, fell below the 50 mark separating growth from contraction at a two-year low of 49.3.

British manufacturing lost momentum as new orders contracted at the fastest pace in two years, adding to signs of a faltering economy.

Meanwhile, manufacturing activity in Asia slowed as supply disruptions caused by COVID-19 lockdowns in China hit many businesses.

Surveys showed Chinese factory activity picked up in June, although a slowdown in Japan and South Korea, as well as a contraction in Taiwan, highlighted the pressure from supply disruptions , rising costs and persistent material shortages.

China’s manufacturing activity rose to its highest level in 13 months in June as the lifting of COVID-19-related lockdowns prompted factories to rush to meet demand.

Still, tighter policies in other economies facing searing consumer price pressures fueled fears of a global economic slowdown and rattled financial markets.

East-West showdown

“There is hope that the Chinese economy will recover after a period of weakness. But now there is a risk of a slowdown in the US and European economies,” said Yoshiki Shinke, chief economist at Japan’s Dai-ichi Life Research Institute.

“It will be a showdown between the two, although there is a lot of uncertainty about the global economic outlook.”

The final manufacturing PMI at Jibun Bank Japan slipped to 52.7 in June from 53.3 the previous month.

South Korea’s S&P Global PMI fell to 51.3, down for a second month, reflecting supply constraints and a truckers’ strike.

Separate data showed South Korea’s exports, seen as an indicator of global trade as its manufacturers are positioned in many parts of the global supply chain, growing at their slowest pace in 19 months.

On the positive side, China’s Caixin/Markit manufacturing PMI came in at 51.7, marking the first expansion in four months and well above analysts’ expectations for 50.1.

The Caixin survey, which focused on export-oriented small businesses in coastal regions, follows official data showing the country’s factory and service sectors broke three months of declines. activity in June.

India’s PMI showed factory output rose at its slowest pace in nine months as elevated price pressures limited demand and output.

Blockages in China have hampered regional and global logistics and supply chains, with Japan and South Korea reporting a sharp drop in production.

China’s economy has started charting a path to recovery from the supply shocks caused by strict shutdowns, although risks remain, such as lower consumer spending and fears of a new wave of infections. .

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