US and UK manufacturing are declining at the fastest rate since mid-2020; China’s October factory activity weak
US and UK manufacturing are declining at the fastest rate since mid-2020; China’s October factory activity weak
Global factory output weakened in October as fears of a broader slowdown, high inflation and China’s zero-COVID policy hurt demand, a trade survey showed on Tuesday, with continued supply disruptions and recovery prospects. To darken
Inflation has soared globally as supply chains still recovering from the coronavirus pandemic were hit again by Russia’s invasion of Ukraine, forcing consumers to rein in purchases.
Last month US manufacturing activity grew at its slowest pace since the depth of the first COVID-19 lockdown in May 2020, as an aggressive push by the Federal Reserve to raise interest rates to quell demand for the commodities’ high inflation. can be reduced.
The Institute for Supply Management (ISM) on Tuesday said its manufacturing PMI fell to 50.2 in October, from 50.9 in September. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the US economy.
But while overall manufacturing activity fell, the ISM survey’s new orders sub-index rose to 49.2 last month from 47.1 in September, indicating some resilience among US consumers, even as the Fed’s action Curbs expenses.
British manufacturing also suffered its biggest contraction since May 2020 last month, indicating a deep recession was underway.
The final S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) for October fell to 46.2 from 48.4 in September, well below the 50-point mark that separates growth from contraction.
“The October PMI data shows the manufacturing sector is on the verge of recession,” said Gabriella Dickens, UK senior economist at Pantheon Macroeconomics.
Factory activity shrank in South Korea, Taiwan and Malaysia in October, and Japan expanded at its slowest pace in 21 months, highlighting the pain from slowing Chinese demand and extremely high import costs.
China’s Caixin/S&P Global Manufacturing PMI stood at 49.2 in October, up from 48.1 in September. The private sector survey was in line with an official PMI released on Monday, which showed China’s factory activity unexpectedly fell in October.
“Asia is extremely dependent on China,” said Toru Nishihama, chief economist at the Dai-ichi Life Research Institute in Tokyo. “Its zero-COVID policy disrupts the supply chain and prevents Chinese travelers from returning to Asian tourist destinations. It is also hurting the exports of the sector,” he said.
“Another major risk is the pace of US rate hikes. If the Federal Reserve continues to hike rates, it could ignite capital outflows from Asia and hurt exports.”
Analysts say further US interest rate hikes are expected to force other central banks to curb sharp capital outflows by tightening their monetary policies, even if it means cooling already soft economies.
Japan’s Au Jibun Bank Japan Manufacturing PMI fell to 50.7 in October from 50.8 final in September, the weakest growth since January last year.
Highlighting how pain from rising material costs and supply constraints was fueled by a weak yen, auto giant Toyota Motor Corp on Tuesday reported a 25% drop in quarterly profit and cut its annual production target.
The PMI showed South Korea’s factory activity shrank for the fourth straight month in October as export orders fell for the eighth month.
This was followed by the steepest decline in exports to South Korea in 26 months, with shipments to China, its biggest market, extending the decline.
Taiwan and Malaysia both saw a deep contraction in manufacturing, while activity in Indonesia expanded again in October but grew at a slower pace than in the previous month.
The International Monetary Fund cut economic forecasts for Asia last week as global monetary tightness, rising inflation blamed the war in Ukraine, and a sharp slowdown in China dented the region’s recovery prospects.
The impact of China’s strict COVID-19 restrictions continues to grow. This week, restrictions led to the temporary closure of Disney’s Shanghai resort and the closure of Apple Inc. at a major contract manufacturing facility. Affected the production of iPhones.