Global Factory Activity Weakens As Demand Falters

• Global factory activity weakened in March as consumers feeling the pinch from rising living costs cut back, surveys showed on Monday, suggesting a deteriorating outlook will remain a drag on economic recoveries and keep policymakers on their toes.
• S. manufacturing activity slumped to the lowest level in nearly three years as new orders continued to contract, a survey by the Institute for Supply Management (ISM) showed. Its manufacturing PMI fell to 46.3 last month, the lowest reading since May 2020, from 47.7 in February. Economists polled by Reuters had forecast the index dipping to 47.5.
• It was the fifth straight month that the PMI remained below the 50 threshold, which indicates a contraction in manufacturing. However, so-called hard data have suggested that manufacturing, which accounts for 11.3% of the economy, continues to grow moderately.
• Rising borrowing costs as the Federal Reserve fights high inflation have cooled demand for goods, which are typically bought on credit. Demand could also come under further pressure following the recent failure of two U.S. regional banks and the takeover of Credit Suisse, which stressed the financial sector.
• "While an onshoring of supply networks and investment in domestic manufacturing capacity could provide support to factory activity, a further tightening in credit conditions may be a hurdle going forward," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

(Source: Reuters)