According to recent business surveys, the global manufacturing sector faces challenges as demand weakness persists.
While some regions show signs of stabilization, the uneven recovery highlights factories’ challenges in clawing out of a downturn.
In Europe, manufacturing activity remained in contraction territory for the 20th straight month in February.
S&P Global’s final euro zone factory PMI dipped to 46.5 from 46.6 in January.
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- Global manufacturing activity remains in contraction, with eurozone PMI below 50 for 20 straight months.
- Germany and Japan see faster declines in February due to weak demand.
- Bright spots include South Korea, India, and parts of Southeast Asia, where growth continues.
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Global Manufacturing Struggles to Recover as Demand Woes Persist
The index has stayed below the 50 mark, separating growth from contraction since June 2021, underscoring weak demand across the region.
Germany, the euro zone’s largest economy, saw its downturn deepen as output and new orders fell faster.
Italy’s manufacturing sector contracted for the 11th consecutive month, though showed some tentative signs of improvement.
Spain was a bright spot, with factory activity expanding for the first time in almost a year as domestic demand increased.
Britain marked one year of declining factory output outside the eurozone despite a slight rise in its PMI.
“Recovery in the manufacturing sector remains slow,” said Boudewijn Driedonks, a consultant at McKinsey & Company.
In China, the world’s second-largest economy, PMIs painted a mixed picture. While the official PMI showed continuing contraction, the private sector Caixin PMI indicated a slight pickup in growth.
Investors are looking to China’s annual parliamentary meeting next week for signs policymakers will do more to stimulate growth.
Japan’s weakness also persisted into 2023, complicating the Bank of Japan’s efforts to normalize monetary policy.
“Depressed demand in domestic and international markets continued to weigh on sector performance,” said Usamah Bhatti, an S&P Global Market Intelligence economist, as production and new orders declined.
Brighter spots in Asia included South Korea and India. South Korean export growth topped forecasts in February, while India’s PMI hit a five-month high thanks to a boost in new orders and output.
Southeast Asia also saw expansion, with PMIs pointing to growth in Vietnam, Indonesia, and the Philippines.
However, Malaysia and Thailand continue to see manufacturing declines.
The uneven global recovery highlights the tricky balancing act for policymakers in boosting demand without fueling inflation.
While some countries like Spain see gains from domestic consumption, weak international trade continues to drag on export powerhouses like Germany and Japan.
How quickly global demand rebounds remains the key question mark for the manufacturing sector in 2023.
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