A series of purchasing managers' indices (PMI) for July showed new orders falling in the manufacturing powerhouses although they did show price pressures may be waning.
The Institute for Supply Management (ISM) said on Monday that its index of US factory activity dipped to 52.8 last month, the lowest reading since June 2020, when the sector was pulling out of a Covid-19 induced slump. The ISM PMI index was at 53.0 in June. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the US economy.
However, the ISM survey's forward-looking new orders sub-index dropped to 48.0 last month from a reading of 49.2 in June, a second straight monthly contraction. Combined with a steady reduction in order backlogs, that suggests a further slowdown in US manufacturing in the months ahead.
In the eurozone, S&P Global's final manufacturing PMI fell to 49.8 in July from June's 52.1, its first time below the 50 mark separating growth from contraction since June 2020.
A July Reuters poll gave a 45% chance of a recession in the eurozone within a year.
An index measuring output, which feeds into a composite PMI due on Wednesday and seen as a good gauge of economic health, sank to a more than two-year low of 46.3.
S&P Global said production was falling in all eurozone countries surveyed other than the Netherlands and the rate of decline was of particular worry in Germany, France and Italy – the bloc's three biggest economies.
Germany's manufacturing sector contracted in July for the first time in over two years, hurt by a deepening slump in new orders that darkens the outlook for Europe's largest economy.
S&P Global's final PMI for manufacturing, which accounts for about a fifth of Germany's economy, fell to 49.3 from 52.0 in June. A Reuters poll of analysts had pointed to a July reading of 49.2.
An index of new orders came in at 40.1, dropping further below the 50 mark, which separates growth from contraction, and slumping to its lowest level since May 2020.
Meanwhile, retailers in Germany ended the first half of 2022 with the sharpest year-on-year sales drop in nearly three decades as the cost of living crisis, the Ukraine war and lingering effects from the coronavirus pandemic took their toll.
“I expect GDP in the eurozone to contract in the third quarter but not as much as these retail sales or PMI data suggest,“ said Holger Schmieding at Berenberg.
“It’s going to be rough, but it’s going to be rough from a stronger starting point.”
The bloc's economy grew faster than expected last quarter, an early reading showed on Friday.
The Bank of England is likely to raise borrowing costs by 50 basis points this week despite the country's PMI showing manufacturing output and new orders declined in July at the fastest rate since May 2020.
British manufacturing output and new orders declined in July at the fastest rate since May 2020.
The S&P Global/CIPS UK Manufacturing PMI fell last month to 52.1 from 52.8 in June, revised down slightly from a preliminary “flash” July reading of 52.2. The fall would have been greater but for an upward revision to the survey's jobs index.
The survey's gauges of output and new orders fell sharply and reached their lowest levels since the onset of the Covid-19 pandemic.
In Asia, South Korea's factory activity fell for the first time in almost two years while Japan saw its slowest growth in activity in 10 months amid persistent supply chain disruptions.
The S&P Global PMI fell to a seasonally-adjusted 49.8 in July from 51.3 in June, falling below 50 for the first time since September 2020. Output fell for a fourth straight month and by the sharpest rate since October 2021, as new orders decreased for the first time in 22 months and those from overseas for the fifth month in a row.
Activity growth in China also slowed, the private sector Caixin PMI showed on Monday, despite some easing of the strict domestic Covid-19 curbs that slammed the world's second-largest economy in the second quarter.
Monday's Caixin PMI followed an even bleaker reading from the government's official PMI released on Sunday, that showed activity unexpectedly falling in July amid fresh Covid-19 outbreaks.
The Caixin/Markit manufacturing PMI eased to 50.4 from 51.7 in June, the poll showed, well below expectations for a slight dip to 51.5.
On Sunday, the official manufacturing PMI from the National Bureau of Statistics swung to 49.0 in July from 50.2 in June in an unexpected slump.
Japan's manufacturing activity expanded at the weakest rate in 10 months in July, as pressure from rising prices and supply disruptions hurt output and new orders, suggesting a solid post-pandemic economic recovery is still some way off.
The final au Jibun Bank Japan Manufacturing PMI dipped to a seasonally adjusted 52.1 in July from the previous month's 52.7 final. That marked the slowest pace of growth since September last year, and was slightly lower than a 52.2 flash reading.
Manufacturing activity suffered from contractions in output and overall new orders as well as a slower expansion in the backlog of work, the PMI survey showed.
There was some positive news for the region, however, with PMI indicating input price growth has moderated in China, Taiwan, India and South Korea.
Conditions in parts of Southeast Asia were also upbeat, with PMI pointing to accelerating activity in Indonesia, Malaysia and Thailand where new orders growth bucked declines seen elsewhere in the region.
India’s factory activity expanded at its quickest pace in eight months in July, driven by solid growth in new orders and output as demand continued to improve on the back of easing price pressures, a private survey showed.
The Manufacturing PMI, compiled by S&P Global, jumped to 56.4 in July from June's 53.9, remaining above the 50-level separating growth from contraction for a thirteenth month.
While both new orders and output grew at their fastest pace since November, both input and output prices increased at their slowest rate in several months in a further boost to demand. – Reuters