Factories in the eurozone continued to experience contraction last month, according to recent surveys released on Monday as data suggests that a recovery may still be some time away, even as manufacturers in Asia and the UK show tentative signs of improvement.
The HCOB final manufacturing Purchasing Managers’ Index (PMI) for the eurozone stood at 45.8 in August, slightly above the preliminary estimate of 45.6 but well below the 50 mark that separates growth from contraction.
Riccardo Marcelli Fabiani from Oxford Economics commented, “The final August manufacturing PMI reading was yet another indication that the recovery of the industrial sector will neither be immediate nor vigorous, as the eurozone index remains stuck in contractionary territory.”
The PMI for new orders fell to its lowest level since December, and demand from abroad decreased at the fastest rate this year. Notably, eurozone manufacturers raised their prices for the first time in 16 months, driven by increases in France, the Netherlands, Greece, and Italy. Despite this, overall inflation in the eurozone dropped to a three-year low of 2.2% in August, bolstering arguments for further policy easing from the European Central Bank (ECB).
In contrast to the eurozone, Asian manufacturers are showing signs of recovery. China’s Caixin/S&P Global manufacturing PMI rose to 50.4 in August from 49.8 in July, surpassing analysts’ expectations.
However, an official PMI survey released simultaneously indicated ongoing declines in manufacturing activity, highlighting a mixed picture for the Chinese economy.Factory activity in South Korea and Taiwan expanded in August, while Japan experienced a slower rate of contraction, aided by robust global demand for semiconductors. Japanese manufacturers also benefited from a rebound in car production following a temporary suspension due to a safety scandal.
Despite the positive signals from some Asian countries, economic headwinds remain a concern. Toru Nishihama, chief emerging market economist at Dai-ichi Life Research Institute, noted, “Chip-producing countries are doing fairly well, but China’s slowdown will continue to drag on Asia’s manufacturing activity for quite some time.” He added that slowing U.S. demand could further impact Asian economies already wary of the ramifications of sluggish Chinese growth.
In the UK, factories reported their strongest month in over two years, as domestic demand offset a decline in exports, providing a favorable backdrop for Prime Minister Keir Starmer’s government as it seeks to accelerate economic growth.
