Global factory activity weakens as demand falters
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[April 03, 2023] By
Jonathan Cable and Leika Kihara
LONDON/TOKYO (Reuters) - 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.
Although factories across the euro zone saw a further decline last
month, the cost of manufacturing fell for the first time since mid-2020.
S&P Global's final euro zone manufacturing Purchasing Managers' Index
(PMI) fell to 47.3 in March from February's 48.5, just ahead of a
preliminary reading of 47.1 but below the 50 mark separating growth from
contraction for a ninth month.
An index measuring output, which feeds into a composite PMI due on
Wednesday that is seen as a good guide to economic health, did however
rise to a 10-month high of 50.4 from 50.1.
![](http://archives.lincolndailynews.com/2019/Sep/05/images/ads/current/stclara_lda_SPONSOR_090519.png)
"Today's PMI results highlight that challenges remain for manufacturing
companies. Although consumer demand has largely held across sectors,
this could lessen gradually," said Thomas Rinn, global industrial lead
at Accenture.
German manufacturing activity shrank in March at the fastest pace in
almost three years, while weak demand continued to drag down France's
factory sector as purchasing managers turned pessimistic about the
12-month outlook for their businesses.
In Britain, outside the European Union, manufacturers also slipped, but
did turn more optimistic about the future as cost pressures and supply
chain problems eased.
The improving supply chains and lower energy costs meant input prices
fell in the euro zone for the first time since July 2020 - just when the
COVID-19 pandemic was cementing its grip.
But oil prices surged on Monday, posting the biggest daily rise in
nearly a year, after a surprise announcement by OPEC+ on Sunday to cut
more production, likely adding to inflationary pressures.
![](http://archives.lincolndailynews.com/2023/Apr/03/images/ads/current/firststatemortgage_sda_020223.png)
ASIAN STRAIN
Export-reliant Japan and South Korea both saw manufacturing activity
contract in March while growth in China stalled, highlighting the
challenge facing Asia as authorities try to keep inflation in check and
fend off headwinds from slackening global economic momentum.
"With global growth set to remain weak in the coming quarters, we expect
manufacturing output in Asia to remain under pressure," said Shivaan
Tandon, emerging Asia economist at Capital Economics.
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![](../images/040323PIX/busine18.jpg)
An employee works at a carbon fibre
production line inside a factory in Lianyungang, Jiangsu province,
China October 27, 2018. REUTERS/Stringer
![](http://archives.lincolndailynews.com/2023/Apr/03/images/ads/current/graue_lda_preowned_032723.jpg)
China's Caixin/S&P Global manufacturing PMI stood at 50.0 in March,
much lower than market forecasts of 51.7 and below February's 51.6.
The reading echoed slower growth in an official PMI released on
Friday.
"The foundation for economic recovery is not yet solid. Looking
forward, economic growth will still rely on a boost in domestic
demand, especially an improvement in household consumption," Wang
Zhe, senior economist at Caixin Insight Group, said on China's PMI.
South Korea's PMI fell to 47.6 in March from 48.5 in February, its
weakest in six months as export orders took a hit.
Japan's final au Jibun Bank PMI stood at 49.2 in March, up from
February's 47.7 but remaining below the 50-threshold, as new orders
contracted for a ninth-consecutive month.
A separate central bank survey released on Monday showed Japanese
big manufacturers' sentiment soured in January-March to its worst in
more than two years, as weak external demand added to the struggle
for firms already grappling with rising raw material costs.
India was a rare bright spot in the region, with its manufacturing
sector expanding at its quickest pace in three months in March on
improved output and new orders, suggesting its economy is better
placed than most of its peers to weather a global slowdown.
![](http://archives.lincolndailynews.com/2023/Apr/03/images/ads/current/LPL_small%201.gif)
Vietnam and Malaysia saw factory activity shrink in March, while
that of the Philippines expanded at a slower pace than in February,
surveys showed.
While supply disruptions caused by the pandemic have mostly run
their course, weak chip demand and fresh signs of slowdown in global
growth have emerged as risks to many Asian economies.
The collapse last month of two U.S. banks and the take-over of
Credit Suisse have added to uncertainty over the global outlook by
causing market turbulence and shedding light on potential
vulnerabilities in the world financial system.
While indications are that the U.S. Federal Reserve will pause its
tightening cycle soon, the outlook remains clouded by the
banking-sector troubles, still-high inflation and slowing global
growth.
(Reporting by Jonathan Cable and Leika Kihara; Editing by Shri
Navaratnam and Sharon Singleton)
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