The beginning of 2024 saw a varied performance across global manufacturing sectors, highlighted by the latest surveys released on February 1. Weak demand from China impacted Asia’s economic stability, while disruptions in Red Sea shipping affected European delivery times. The euro zone’s manufacturing downturn showed signs of easing, yet it’s expected to continue into the current quarter, with many indicators still signaling contraction.
Euro Zone’s Manufacturing Sector
The euro zone’s manufacturing activity downturn moderated for the third consecutive month, with the HCOB’s final manufacturing Purchasing Managers’ Index (PMI) by S&P Global rising to 46.6 in January from 44.4 in December. Despite this improvement, the PMI remained below the 50 threshold, indicating ongoing contraction. Positive movements were seen in almost all sub-indices, suggesting a possible reduction in inflationary pressures.
Inflation rates in the eurozone decreased as anticipated, although core price pressures did not fall as much as expected, according to preliminary data.
- Germany and France saw their manufacturing downturns soften.
- Italy experienced a less severe contraction in its manufacturing sector for the tenth consecutive month.
- Spain also reported a notable slowdown in the rate of contraction.
- Britain continued to face manufacturing challenges, marking an 18th month of contraction, albeit at a reduced pace.
Asian Sector Overview
China’s manufacturing PMI, according to Caixin/S&P Global, remained stable at 50.8 in January, showing a stark contrast to official data indicating ongoing contraction. This mixed data underscores the persistent economic challenges faced by the world’s second-largest economy, including deflationary pressures and weak demand.
Other Asian countries displayed varied performances:
- South Korea saw its first factory activity expansion in 19 months, driven by increased orders from the US and China.
- Taiwan and Malaysia reported shrinking activity.
- The Philippines experienced slower growth.
Japan’s manufacturing sector contracted for the eighth consecutive month due to declines in output and new orders, partly attributed to production halts at Daihatsu, a Toyota Motor Corp unit. This downturn highlights the significant influence of Toyota’s production plans on the Japanese economy and its supply chain.
In contrast, India witnessed a substantial improvement in manufacturing, with January seeing the fastest activity expansion in four months fueled by strong demand.
The International Monetary Fund has upgraded its growth forecast for Asia, predicting a 4.5% expansion this year, buoyed by robust demand from the US and anticipated stimulus measures in China.
Featured image credit: Alvarez via Getty Images