Strain on global manufacturing eases as factories post growth
Labourers work at an assembly line to produce ventilators at a factory in Hanoi, Vietnam on Monday. Reuters
US manufacturing continued to recover in July and demand jumped compared to June but firms are still shedding jobs, according to an industry survey released on Monday.
Just over 18 million people have been infected by the coronavirus and the hit from lockdowns and social distancing policies to contain its spread have had a devastating impact on global growth and pushed many economies into recession.
With still-rising coronavirus infections - and the risk of renewed lockdowns increasing - the chances of any rebound reversing course have risen and the world economic outlook has dimmed again, according to Reuters polls of over 500 economists globally.
Still, while the eurozone economy contracted a record 12.1% last quarter, a Reuters poll predicted 8.1% growth during the current one.
Factories appear to be playing their part in the bloc’s potential recovery, and IHS Markit’s final Manufacturing Purchasing Managers’ Index bounced to 51.8 in July for the euro zone from June’s 47.4 - its first time above the 50 mark separating growth from contraction since January 2019. Manufacturers in Germany, Europe’s largest economy, saw an expansion for the first time since December 2018 and in France activity picked up a touch.
Meanwhile, British manufacturing output grew at its fastest pace in nearly three years as factories reopened and demand began to accelerate after a lockdown was eased.
Manufacturing activity in China expanded at the fastest pace in nearly a decade as domestic demand improved, a private sector survey showed, suggesting the world’s second-largest economy would help cushion the pandemic’s blow to world growth.
China’s Caixin/Markit Manufacturing PMI rose to 52.8 from June’s 51.2, marking the sector’s third consecutive month of growth and the biggest jump since January 2011.
The upbeat findings echoed an official survey on Friday, adding to evidence China’s economy is getting back on its feet faster than expected.
Japan, for one, will enjoy only a “very gradual and protracted recovery” as concerns about a resurgence in COVID-19 cases will weigh on domestic and overseas spending, said Stefan Angrick, senior economist at Oxford Economics.
Japan and South Korea saw factory activity shrink at a much slower pace, a sign pressures on manufacturers were easing and raising hopes the worst impact from the pandemic was over.
India’s factory slump also deepened as renewed lockdown measures to contain surging virus cases weighed on demand and output.
US manufacturing: The Institute for Supply Management’s (ISM) manufacturing index jumped to 1.6 points to 54.2 per cent, the highest in a year and beating the consensus.
Of the 18 manufacturing industries, 13 reported growth last month.
“In July, manufacturing continued its recovery after the disruption caused by the coronavirus (COVID-19) pandemic. Panel sentiment was generally optimistic” with two positive comments received for every negative comment, Timothy R. Fiore, head of the institute’s survey committee, said in a statement.
Seven of the 10 components gained ground in the month, including new orders, which jumped more than five points to 61.5 per cent, and production, which rose just under five points to 62.1 per cent.
Any reading above 50 per cent indicates expansion, and results over 60 per cent mean very strong growth.
Employment also rose but only slightly to 44.3 per cent, meaning job losses continue.
Fiore said companies were almost equally split between those managing headcount with furloughs or hiring freezes and those bringing more workers back to their jobs. He said he sees no reason the expansion won’t continue given strong demand, even as companies express some concern over supply chains and the potential impact of rising cases of coronavirus in some parts of the country.
“We’re learning how to deal with this more now than we were several months ago,” Fiore told reporters in a conference call, noting that new cases no longer cause multi-day shutdowns of factories.
The July result was better than he anticipated, he said. “We’re growing again, from absolutely historical low levels that we saw in April, and there’s no reason why that growth shouldn’t continue. The question is at what rate.”
Services industries, like travel and restaurants, have been hit harder than manufacturing by the pandemic shutdowns, but economists warn the path forward remains uncertain.
The dollar rallied and equity markets rose on Monday as investors welcomed upbeat manufacturing data from around the world and as Microsoft’s pursuit of TikTok’s US operations bolstered the red-hot technology sector.
Gold prices retreated from a record high after some profit-taking and the dollar’s strengthening, though concerns about the coronavirus’ toll on the economy limited bullion’s losses. Oil prices rose as manufacturing data from the United States, Europe and China offset oversupply fears.
Agencies/ More: P16
