GLOBAL ECONOMY Global factory activity remains weak, uncertainty over China clouds the outlook
An employee works on a production line for producing steel structures at a factory in Huzhou, Zhejiang province, China, May 17, 2020. Picture taken May 17, 2020. China Daily via REUTERS/File Photo Rights Acquire
- The downturn in euro zone factories eased in November
- China's private PMI unexpectedly rises in November
- Manufacturing activity is declining in Japan and stabilizing in South Korea
- Weak global demand is clouding the prospects for Asia's fragile recovery
LONDON/TOKYO, Dec 1 (Reuters) – Surveys on Friday showed global manufacturing activity remained weak in November due to weak demand, while factory activity in the euro zone continued to fall, while there were mixed signs about the strength of China's economy.
To curb high inflation, central banks have aggressively raised interest rates. But those increases have largely come to an end as policymakers instead seek to cushion the blow to their economies.
In the 20-member euro zone, Hamburg Commercial Bank's final manufacturing purchasing managers' index (PMI), as measured by S&P Global, was well below the 50 mark that separates contraction and expansion in a broad-based downturn.
Still, it rose to 44.2 in November from 43.1 in October, above the preliminary estimate of 43.8. An index measuring economic performance that is included in a composite PMI, a barometer of economic health, rose to 44.6 from 43.1 on Tuesday.
“It's not great, but we have seen an upward correction, which is a good sign – it's a harbinger of less bad times to come. For the eurozone, the worst will be over by the beginning of next year,” said Berenberg’s Holger Schmieding.
But while the sub-indices gained slightly last month, HCOB warned that the uptrend was tentative and it was too early to call it an uptrend.
In Germany, Europe's largest economy, the PMI remained stubbornly below 50 but showed signs of improvement, while in France factories again suffered from weak demand.
In Britain, outside the European Union, there were further signs that the country could be turning a corner in a prolonged downturn, but businesses remained cautious.
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China's private Caixin/S&P Global Manufacturing PMI unexpectedly rose to 50.7 in November from 49.5 in October, beating analysts' forecasts.
The reading came a day after an official survey showed a decline in both manufacturing and non-manufacturing activity, underscoring worsening problems in the world's second-largest economy.
“The domestic market cannot compensate for the losses in Europe and the United States. “The data shows that factories are producing less and hiring fewer people,” Dan Wang, chief economist at Hang Seng Bank China, said of China’s PMI readings, which vary across samples.
Surveys showed that export-dependent Japan, South Korea and Taiwan bore the brunt of sluggish global demand, with manufacturing activity stagnating in November.
“An early recovery in Asia is unlikely,” said Toru Nishihama, chief emerging market economist at Dai-ichi Life Research Institute. “While exports have likely bottomed out, they will not accelerate much from here as the global economy lacks a key growth engine.”
Japan's final manufacturing PMI from Jibun Bank fell to 48.3 from 48.7 in November, shrinking at its fastest pace in nine months.
South Korea's PMI was 50.0 in November, up slightly from October's reading of 49.8. The recovery in the factory reading came after 16 consecutive months of declines through October, the longest decline since the survey began in April 2004.
Manufacturing activity also contracted in Taiwan, Vietnam and Malaysia, while it increased in India, Indonesia and the Philippines, the surveys showed.
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China's economy has struggled to mount a strong recovery from the pandemic this year, making the already cloudy global outlook even bleaker as economies in the U.S. and Europe begin to feel the pressure of previous aggressive interest rate hikes.
“The weakness in China's services sector is particularly worrying as it shows that demand is weakening despite increasing supply,” said Nishihama of the Dai-ichi Life Research Institute.
In India, the PMI survey showed the country's manufacturing growth accelerated in November due to robust production and new orders.
While domestic demand appeared strong, international demand suffered a slump and new export orders were at a five-month low.
Reporting by Leika Kihara; Editing by Jamie Freed and Gareth Jones
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