Global Factory Output Slumps As Weak Demand Weighs  

• Global factory activity slumped in June, business surveys showed on Monday, as sluggish demand in China and in Europe clouded the outlook for exporters. Across the Eurozone, manufacturing contracted faster than initially thought, as persistent policy tightening by the European Central Bank squeezed finances, and in Britain, the pace of decline steepened as optimism faded. Later on Monday, US ISM Manufacturing Purchasing Managers Index (PMI) data came in lower than expected (actual 46 vs. expected 46.9).
• "There are no real signs we are going to get any rebound in the manufacturing sector this year. On the whole we are still talking about a negative assessment," said Rory Fennessy, European economist at Oxford Economics on the eurozone release.
• Compiled by S&P Global, Hamburg Commercial Bank’s final eurozone manufacturing Purchasing Managers' Index (PMI) fell to 43.4 from May's 44.8. This is the lowest it has been since the COVID pandemic was cementing its grip on the world, below a preliminary reading and further from the 50 mark separating growth from contraction.
• The S&P Global/CIPS UK Manufacturing PMI also fell to 46.5 from 47.1 in May, its lowest reading this year and one of the weakest since the 2008-09 financial crisis.
• China's Caixin/S&P Global Manufacturing PMI eased to 50.5 in June from 50.9 in May, the private survey showed. This figure, combined with Friday's (June 30) official survey on China’s factory activity shows a steady decline in the manufacturing sector in China and it adds evidence to the fact the world's No. 2 economy lost steam in the second quarter.
• The impact is being felt in Japan where the final au Jibun Bank PMI fell to 49.8 in June, returning to a contraction after expanding in May for the first time in seven months. New orders from overseas customers decreased at the fastest rate in four months reflecting feeble demand from China. South Korea's PMI fell to 47.8 in June, extending its downturn to a record 12th consecutive month on weak demand in Asia and Europe. Factory activity also contracted in Taiwan, Vietnam and Malaysia, the PMI surveys showed.
• Asia is heavily reliant on the strength of China's economy, which saw growth rebound in the first quarter but subsequently fell short of expectations. The fate of Asia's economy, including China's, will have a huge impact on the rest of the world with aggressive monetary tightening also expected to weigh on U.S. and European growth.

(Source: Reuters)