LONDON/TOKYO, Dec 1 (Reuters) – Factory output fell sharply last month due to slowing global demand and the impact of COVID-19 lockdowns in China, although the slowdown eased in Europe and that activity in India has actually picked up, according to surveys released Thursday.
Although polls indicated that eurozone factories still face a harsh winter, this may not be as severe as initially feared and there were signs that rampant inflationary pressures were attenuated.
Inflation may have peaked, or is about to peak, in many economies, but sharply rising prices and rising borrowing costs as central banks aggressively tighten policy left indebted consumers feeling the pinch and forcing them to cut spending.
“Global consumers are reining in their spending on discretionary goods in a world of stagflation,” said Duncan Wrigley of Pantheon Macroeconomics.
S&P Global’s final Manufacturing Purchasing Managers’ Index (PMI) for the euro zone rose to 47.1 from 46.4 in October, but was below a preliminary reading of 47.3 and below the 50 level which marks the growth of the activity.
An index measuring production, which feeds into a composite PMI due Monday and seen as a good guide to economic health, rose from 43.8 to 46.0, marking its sixth month of readings below 50.
“Today’s PMI data supports our view that the manufacturing sector is headed for a winter recession, but suggests the outlook for the sector is starting to improve slightly,” said Riccardo Marcelli Fabian of Oxford Economics.
“While indicators suggest fundamentals are in better shape than in previous crises, the eurozone is set to experience a mild and broad-based recession this winter.”
In a recent Reuters poll, economists gave a 78% chance of a recession within a year.
In Britain, outside the European Union, manufacturing activity fell for a fourth consecutive month as companies faced the weakest foreign demand for two-and-a-half years, leading to job cuts and a loss of confidence for the coming year, its PMI showed.
The figures add to signs that Britain’s economy has fallen into recession, although there was a glimmer of light for the Bank of England as factory producer price inflation slowed to its lowest level since March 2021.
The same was true in the Eurozone where, although they remained high, the input and output price indices fell considerably, which is probably good news for policymakers at the European Central Bank.
ASIAN TROUBLES
The results highlighted the darkening of Asia’s economic outlook for 2023, as China’s lockdowns disrupt international supplies and heighten fears of another collapse in its economy, the world’s second largest. .
These blockages have affected production and fueled rare street protests in many cities across China.
Amid pandemic curbs, Chinese factory activity declined in November, a private survey found. The result implied weaker job and economic growth in the fourth quarter.
China’s Caixin/S&P Global manufacturing PMI came in at 49.4 in November, down from 49.2 the previous month. It has been below 50 for four straight months.
The figure follows downbeat data from an official survey on Wednesday that showed manufacturing activity hit a seven-month low in November.
Analysts see growing downside risks to China’s economic growth in the fourth quarter, despite a flurry of policies aimed at supporting activity, including cuts in banks’ reserve requirement ratios and support for the sluggish real estate sector.
The impact of China’s woes has been widely felt across Asia. Taiwan’s PMI came in at 41.6 in November and Vietnam’s fell to 47.4. Indonesia slipped to 50.3 from 51.8.
Manufacturing activity also contracted in export-dependent economies, notably Japan and South Korea, and in emerging countries, such as Vietnam, underscoring the growing damage caused by weak global demand and costs. stubbornly high inputs, according to surveys.
Japan’s PMI at Jibun Bank also fell from 50.7 to 49.0 in November, its first contraction since November 2020.
Factory activity in South Korea fell for a fifth consecutive month, but the slowdown moderated slightly, possibly suggesting the worst was over for businesses there.
However, South Korea’s exports in November suffered their biggest annual decline in 2.5 years, according to separate data, hit by cooling global demand in major markets led by China and a slowdown in the economy. semiconductor industry.
In a rare bright sign, India saw factory activity rise in November at its fastest pace in three months, helped by robust demand for consumer goods and slowing input cost inflation. .
Reporting by Jonathan Cable and Leika Kihara; Editing by Bradley Perrett and Susan Fenton
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