Employees work on the production line at the Jingjin filter press factory in Dezhou, Shandong province, China, August 25, 2022. Portal/Siyi Liu/File Photo Acquire License Rights
- China’s private PMI unexpectedly rises in August
- The rebound in China could be a sign that official efforts are bearing fruit
LONDON/TOKYO, Sept 1 (Portal) – The euro zone manufacturing downturn eased last month, suggesting the worst may be over for the bloc’s struggling factories, while an unexpected recovery in China helped some export-dependent ones There is hope for economies, as private surveys have shown.
However, Europe’s largest economy, Germany, remained a negative outlier among the continent’s major players, and factory activity weakened across much of Asia as manufacturers there felt the strain of rising input costs and slowing global demand.
Central banks have aggressively raised interest rates to curb strong inflation but are likely nearing the end of tightening cycles as they await enforcement and try to cushion the blow to their economies from sluggish global demand.
S&P Global’s final HCOB manufacturing purchasing managers’ index (PMI) for the euro zone rose to a three-month high of 43.5 in August from 42.7 in July, but was below the preliminary reading of 43.7. A value below 50 indicates a decline in activity.
An index measuring economic performance, which is included in a composite PMI out on Tuesday and is considered a good indicator of economic health, rose to 43.4 from 42.7.
“We are now in a better position than many expected given how high and how quickly interest rates have risen. But it’s very inconsistent,” said OANDA’s Craig Erlam.
“This gives the European Central Bank something to think about because it doesn’t want to do too little on the inflation front, but it also doesn’t want to destroy the economy.”
Germany’s manufacturing sector, which accounts for around a fifth of the German economy, remained in a downturn due to weak demand and rapidly falling production. In France, production contracted for the seventh month in a row.
In Britain outside the European Union, factories experienced their weakest month since the start of the COVID-19 crisis, with orders falling dramatically due to rising interest rates at home and abroad.
MIXED BAG
China’s private Caixin/S&P Global Manufacturing PMI rose to 51.0 from 49.2 in August, beating analysts’ forecasts and crossing the 50.0 threshold.
The reading came a day after an official survey showed manufacturing activity fell for a fifth month, providing a mixed picture of business conditions in the world’s second-largest economy.
While the recovery in factory conditions in China could be a sign that official efforts to revive growth are beginning to take effect, manufacturing activity remained stagnant in most of Asia.
Japan contracted for a third straight month, while South Korea extended its longest-ever slump due to wage pressures and weak exports, surveys showed.
“It is unlikely that we will see a strong, rapid recovery in the Chinese economy. Since the outlook for advanced economies is also uncertain, it is difficult for Asian companies to be optimistic about the outlook,” said Toru Nishihama, chief emerging market economist at Dai-ichi Institute for Life Research.
“Stubborn food inflation is also affecting consumption in some Asian countries. The region’s economy could come to a standstill.”
Asia is one of the few bright spots in the global economy, although continued weakness in China clouds the outlook.
In its revised forecasts released in July, the International Monetary Fund forecast economic growth in emerging Asia will accelerate from 4.5% in 2022 to 5.3% this year. He expects China’s economy to grow 5.2% this year, after a 3.0% increase in 2022.
Japan’s final manufacturing PMI from au Jibun Bank was 49.6 in August, unchanged from July and remaining below breakeven for a third month as input costs rose.
South Korea’s PMI fell to 48.9 from 49.4, marking the 14th month of decline due to weak export orders.
Factory activity also fell in Taiwan, Malaysia and the Philippines last month. In India, however, growth accelerated at its fastest pace in three months, driven by strong expansion in new orders and production.
Reporting by Jonathan Cable and Leika Kihara, editing by Shri Navaratnam and John Stonestreet
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