An employee works at a factory of metal fabricators LeeMark Spinnings, in Birmingham, central England, on June 7, 2023. (PHOTO / AFP)
LONDON/TOKYO – Global factory activity slumped in June, business surveys showed on Monday, as sluggish demand in Europe clouded the outlook for exporters.
Across the euro zone manufacturing contracted faster than initially thought, as persistent policy tightening by the European Central Bank squeezed finances, and in Britain the pace of decline steepened as optimism faded.
In Asia, factory activity contracted in Japan and South Korea as Asia's economic recovery struggled to maintain momentum.
Compiled by S&P Global, HCOB's final euro zone manufacturing Purchasing Managers' Index (PMI) fell to 43.4 from May's 44.8, its lowest since the COVID pandemic was cementing its grip on the world, below a preliminary reading and further from the 50 mark separating growth from contraction
Data due later on Monday are expected to show a further contraction in the United States.
"There are no real signs we are going to get any rebound in the manufacturing sector this year. On the whole we are still talking about a negative assessment," said Rory Fennessy, European economist at Oxford Economics on the euro zone release.
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Compiled by S&P Global, HCOB's final euro zone manufacturing Purchasing Managers' Index (PMI) fell to 43.4 from May's 44.8, its lowest since the COVID pandemic was cementing its grip on the world, below a preliminary reading and further from the 50 mark separating growth from contraction.
June's downturn was broad-based with surveys published earlier on Monday showing factory activity in all four of the euro zone's biggest economies contracted last month.
The S&P Global/CIPS UK Manufacturing PMI fell to 46.5 from 47.1 in May, its lowest reading this year and one of the weakest since the 2008-09 financial crisis.
Asian pain
In Japan, the final au Jibun Bank PMI fell to 49.8 in June, returning to a contraction after expanding in May for the first time in seven months.
South Korea's PMI fell to 47.8 in June, extending its downturn to a record 12th consecutive month on weak demand in Asia and Europe.
Factory activity also contracted in Taiwan, Vietnam and Malaysia, the PMI surveys showed.
There were bright patches among the economic indicators with India's manufacturing industry bucking the trend and expanding at a brisk pace in June, albeit slightly slower than in May, supported by robust demand.
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The Bank of Japan's closely watched tankan survey also showed Japanese business sentiment improving in the second quarter as raw material costs peaked and the removal of pandemic curbs lifted consumption.
The fate of Asia's economy will have a huge impact on the rest of the world with aggressive monetary tightening also expected to weigh on US and European growth.
In forecasts released in May, the International Monetary Fund said it expects Asia's economy to expand 4.6 percent this year after a 3.8 percent gain in 2022, contributing around 70 percent of global growth.
But it cut next year's Asian growth forecast to 4.4 percent and warned of risks to the outlook such as stickier-than-expected inflation and slowing global demand.