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GLOBAL ECONOMY Global factory activity mixed in August, signs of easing cost pressures

A worker checks a machine at a factory in Higashi-Osaka, June 23, 2022. REUTERS/Sakura Murakami

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  • US factory activity is stable
  • Eurozone, UK factory activity declines in August
  • Factory activity in China falls for first time in three months

WASHINGTON/LONDON (Reuters) – U.S. manufacturing grew steadily in August, but factory activity in China, the eurozone and the U.K. fell as Russia’s war in Ukraine and China’s zero coronavirus response pushed businesses to It continues to hit, according to Thursday’s survey. However, there were signs that cost pressures were beginning to ease.

The overall weakness in global manufacturing activity added to signs of weak demand in many countries, creating headaches for companies already suffering from prolonged supply constraints.

Major central banks are expected to continue aggressive rate hikes to keep inflation in check, fueling fears of a global recession and waning optimism.

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The Institute for Supply Management (ISM) said Thursday that the U.S. factory activity index remained unchanged at 52.8 last month, the lowest since June 2020 when the sector emerged from a COVID-19-induced recession. be. A figure above 50 points to an expansion in manufacturing, which accounts for his 11.9% of the US economy.

However, the positive new orders sub-index recovered to 51.3 last month from 48.0 in July, ending a second straight month of decline, and a rising order backlog meant that factories in China, the world’s largest economy, could be on the decline for some time. Suggested to stay strong.read more

U.S. manufacturing has shown resilience despite a shift in spending on services and weaker business confidence amid rapidly rising interest rates.

There has also been some relief for U.S. factories struggling with soaring costs, as weaker global demand has had the side effect of easing price pressures. A measure of input prices paid by manufacturers fell to 52.5, the lowest since June 2020, from 60.0 in July.

Elsewhere, input prices fell in China and Taiwan for the first time since May 2020. The South Korean manufacturer saw his August input price rise at its slowest pace in 19 months. Also, the average input cost faced by Taiwan’s commodity producers fell for the first time since May. 2020.

In the Eurozone, the input price index, well above its long-term average, has fallen to its lowest level since the beginning of last year.

However, this did little to dispel concerns about a slowdown in the global economy.

“We are forecasting a recession next year in the eurozone and the US. Whether that extends to a global recession remains to be seen,” said Peter Schaffric of Royal Bank of Canada. .

Shrinking manufacturing in Europe and Asia

Outside the United States, signs of tension deepened. Manufacturing activity across the eurozone contracted for two months in August, but weak demand prevented factories from selling as much as they produced, building up inventories of finished goods at a record pace. I was.

S&P Global’s final Eurozone Manufacturing Purchasing Managers Index (PMI) fell from 49.8 in July to 49.6 in August, further below the 50 mark that separates growth from contraction.

In the UK, factory output and new orders fell the most in over two years outside the EU. This is in the face of steeper inflation and deepening uncertainty around the risk of recession at home and abroad.

China’s private Caixin manufacturing PMI contracted for the first time in three months in August as weak demand, power shortages and a new outbreak of COVID-19 disrupted production.read more

The unexpectedly weak reading was also reflected in China’s official PMI released on Wednesday, which also fell below 50 points.

“China’s pandemic containment and geopolitical tensions with the United States continue to disrupt supply chains. Rising inflation will also hit domestic demand across Asia,” said Toru Nishihama, chief economist at the Dai-ichi Life Research Institute in Tokyo. ,” he said.

Large exporters also reported weakness. Factory activity in Japan grew at its slowest pace in nearly a year in August, while factory activity in South Korea contracted at its steepest pace in two years, PMIs from both countries showed.

In Germany, Europe’s largest economy and major exporter, the manufacturing sector contracted for two months.

Manufacturing activity has also deteriorated sharply in Taiwan, with both production and new orders declining at the fastest pace since the first wave of the pandemic in May 2020.

The final au Jibun Bank Japan manufacturing PMI for August fell to 51.5 from 52.1 the previous month, marking the lowest growth rate since September 2021.read more

South Korea’s PMI fell from 49.8 in July to 47.6 in August, falling below the 50 threshold for the second consecutive month and reaching its lowest point since July 2020.read more

India’s PMI said factory activity in India remained strong in Aug thanks to higher output as input cost inflation eased.read more

Southeast Asia continues to be a bright spot in the region, with manufacturing growth accelerating in Indonesia, the Philippines and Thailand, while growth in Malaysia slowed slightly, the PMI shows.

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Reporting by Lucia Muticani, Jonathan Cable, and Reika Kihara. Written by Lindsay Dunsmuir.Edited by Sam Holmes, Hugh Lawson, Andrea Ricci

Our standards: Thomson Reuters Trust Principles.

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