Global factory activity ended 2023 on a soft note
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Manufacturing activity in Asia ended the year on a weak note as a sluggish global economy dampened demand for the region’s goods.
PHOTO: BLOOMBERG
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BENGALURU/SYDNEY – Global factories had a weak finish to 2023, with euro-zone activity contracting for an 18th straight month in December and Asia’s manufacturing powerhouses taking a hit due to China’s patchy economic recovery.
A range of factory purchasing managers’ indexes published on Jan 2 showed a persistent slowdown and suggested any turnaround in 2024 would take time, challenging the renewed optimism in financial markets over the past few weeks.
HCOB’s final euro-zone manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, nudged up marginally to 44.4 in December from 44.2 in November but remained well below the 50 level that marks growth in activity.
The trend points to a contraction in euro-zone gross domestic product (GDP) in the quarter just gone by, with manufacturing activity in the 20-country bloc’s largest economy, Germany, also shrinking in December.
The euro-zone economy contracted 0.1 per cent in the third quarter, according to official data, so a second quarter of shrinkage would meet the technical definition of recession.
“Euro-zone manufacturing remained under pressure at the end of 2023,” said chief euro zone economist Claus Vistesen at Pantheon Macroeconomics. “Looking ahead, the slight increase in optimism regarding the year-ahead outlook is a silver lining, but a slim one.”
An index measuring euro-zone factory output, which feeds into a composite PMI due on Jan 4 and seen as a good gauge of economic health, dipped to 44.4 from November’s final reading of 44.6 but was slightly ahead of the 44.1 flash estimate.
Britain’s manufacturing sector also suffered a setback, with the final reading of the S&P Global/CIPS manufacturing PMI weakening to 46.2 in December, ending a run of three months of improvement.
Asia’s factory activity remained weak in December, especially in technology-reliant economies.
South Korean factory activity dipped back into decline and Taiwan extended its contraction for the 19th straight month.
China’s Caixin PMI showed an unexpected acceleration in activity in December, although this contrasted with Beijing’s official PMI released on Dec 31 that remained in contraction territory for the third straight month. The mixed economic prospects for China continue to cloud the outlook for its major trading partners.
“Overall, the economic outlook for (China’s) manufacturing sector continued to improve in December, with supply and demand expanding and price levels remaining stable,” said Caixin Insight Group senior economist Wang Zhe.
“However, employment remained a significant challenge, and businesses expressed concerns about the future, remaining cautious in areas including hiring, raw material purchasing and inventory management.”
Beijing has in recent months introduced a series of policies to shore up a feeble post-pandemic recovery, but the world’s second-largest economy is struggling to gain momentum amid a severe property slump, local government debt risks and soft global demand.
Elsewhere in Asia, PMIs showed activity in Malaysia’s and Vietnam’s factory sectors remained in contractionary mode, although it accelerated slightly in Indonesia. India’s PMI for December will be released on Jan 3, and Japan’s is due on Jan 4.
While Asia’s December PMIs were mostly downbeat, other recent indicators point to signs that the region’s post-pandemic recovery is starting to gain traction.
Singapore’s GDP sped up in the December quarter from a year earlier, helped by firmer construction and manufacturing, data showed on Jan 1. The Republic’s December PMI is set to be released on Jan 3.
South Korea’s exports also perked up in December, albeit at a slower pace as weaker Chinese demand offset robust global sales for semiconductors, according to data released on Jan 1. REUTERS
