Manufacturing growth dragged by soaring prices

Manufacturing growth dragged by soaring prices

Manufacturing growth across Asia and Europe struggled to mark a momentum in July amid soaring prices that have dampened demand.

Accordingly, last month’s purchasing managers’ indexes showed new orders falling in powerhouses. Specifically, the technology giants of northeast Asia and Germany posted significant declines.

S&P Global final manufacturing PMI for the eurozone skidded to 49.80 from June’s 52.10. This latest result indicated the first contraction in the sector since 2020. The survey cited that the decrease was of particular worry in Germany, France and Italy, the bloc’s three biggest economies.

In addition, retailers in Berlin ended the first half of 2022 with the sharpest year-over-year sales drop in three decades. Experts cited that cost of living crisis, the Ukraine war, and the lingering pandemic weighed on manufacturing growth.

In line with this, analysts highly expected the eurozone’s gross domestic product to skid in the third quarter. Nevertheless, the bloc’s economy grew faster than expected last quarter, an early reading showed on Friday.

Subsequently, a surge in global commodity prices amid supply chain disruptions has challenged businesses and policymakers worldwide. As a result, the central banks rushed to aggressively tighten monetary policy, and firms largely cut costs.

Asia’s manufacturing activity fell

Moreover, manufacturing growth in China also slowed, the private sector Caixin PMI showed on Monday. The recent data followed an even bleaker reading from the government’s official PMI released a day earlier.

Beijing’s factory activity slipped to 50.40 last month, missing the analysts’ expected record of 51.50. At the same time, the latest result dropped from the prior 51.70. The slower increase in output and new orders illustrated the impact of COVID-19 lockdowns and electricity shortages.

Likewise, South Korea’s factory activity fell for the first time in almost two years. Then, Japan noted its slowest growth in activity in ten months amid persistent supply chain disruptions.

Conversely, India’s manufacturing PMI expanded at its quickest pace in eight months in July. The South Asian economy remains resilient amid solid growth in new orders and output.