Manufacturing activity weakens globally

Global factory output weakened in October as widespread recession fears, high inflation and China’s “Zero Covid” policy hurt demand, business surveys showed.

Inflation soared around the world as supply chains (still reeling from the pandemic) were hit again by the war in Ukraine, forcing consumers to rein in their purchases.

US manufacturing activity grew at its slowest pace since the first wave of Covid-19 in May 2020, as the Federal Reserve’s (Fed) aggressive push to raise interest rates cools demand for goods.

The Institute for Supply Management (ISM) reported that its manufacturing Purchasing Managers’ Index (PMI) fell to 50.2 points in October from 50.9 in September. A reading above 50 indicates expansion in the sector and one below contraction.

Factory activity still faces headwinds from a strong dollar, slowing demand and unexpected supply shocks,” said Rubeela Farooqi, an economist at High Frequency Economics.

However, the new orders sub-index rose to 49.2 points last month, indicating some resistance among consumers.

On the other hand, Canadian manufacturing activity contracted one point to 48.8 points and that of the United Kingdom fell to 46.2 points.

“UK data points to the sector being close to recession,” said Gabriella Dickens, an economist at Pantheon Macroeconomics.

In Switzerland, the PMI reading dipped 2.2 points but remained in positive territory at 54.9 points, illustrating the resilience of the local economy.

Asia affected by China

Factory activity contracted in South Korea (48.2 points), Taiwan (41.5) and Malaysia (48.7); in Japan it was unchanged at 50.7, highlighting the pain of slowing Chinese demand and high import costs.

China’s Caixin Manufacturing PMI stood at 49.2 vs. 48.1 in September.

“Asia is extremely dependent on China. His health policy disrupts supply chains and hurts the region’s exports,” said Toru Nishihama, an economist at the Dai-ichi Life Research Institute.