LONDON/TOKYO: Manufacturing growth from Asia to Europe is slowing as China’s COVID-19 curbs and Russia’s invasion of Ukraine disrupt supply chains, while the rising risk of a recession in the United States poses a new threat to the global economy. has been made.
Higher prices in the euro area meant that demand for manufactured goods fell at the sharpest rate since May 2020 when the coronavirus pandemic took hold, with S&P Global’s headline Factory Purchasing Managers’ Index (PMI) hitting a nearly two-year low. level reached. From 52.0 54.6.
A Reuters poll predicted a more modest decline at 53.9 and the index moved closer to the 50 mark separating growth from contraction.
“June’s euro zone PMI surveys showed a further slowdown in the services sector, while output in the manufacturing sector is now falling outright,” said Jack Allen-Reynolds at Capital Economics.
“With price indices remaining extremely strong, the euro area has entered a period of stagflation.”
Economists in a Reuters poll published earlier on Thursday predicted a one in three chance of a recession in the bloc within 12 months. He also said that inflation – which hit an all-time high of 8.1% last month – was just peaking.
Federal Reserve Chairman Jerome Powell said on Wednesday that the central bank was not trying to stoke inflation in the United States, but was fully committed to bringing prices under control, even if doing so could lead to an economic downturn. be at risk of
He acknowledged the recession was “definitely a possibility”.
Inflation is running at least three times above the Fed’s target level of 2% and is expected to deliver another 75 basis point interest rate hike next month, according to economists surveyed by Reuters.
Despite Powell’s comments, some primary dealers have either started forecasting a recession earlier this year or brought forward their bearish calls.
US investment firm PIMCO warned on Wednesday that central banks risk a recession by tightening monetary policy to fight persistently high inflation.
There is a 40% chance of one american recession Over the next two years, with a 25% chance of that happening in the coming year, a Reuters poll found earlier this month.
“The global macroeconomic outlook has deteriorated materially since the end of 2021,” Fitch Ratings said. global development Outlook in June was 2.9% from 3.5% in March.
“Inflation, which is characterized by persistently high inflation, high unemployment and weak demand, has become a major risk topic since the end of the first quarter and poses a potentially high risk scenario,” a report released this week said.
A series of recent data globally showed that policymakers are following a tight rope as they try to ease inflationary pressures without putting their economies into a sharp recession.
US retail sales unexpectedly fell in May and current home sales fell to a two-year low, a sign high inflation and rising borrowing costs were hurting demand.
Britain’s economy unexpectedly shrank in April, raising fears of a sharp recession as companies complain of rising production costs. Its PMI also indicated the economy was stalling as high inflation hit new orders and businesses reported anxiety levels that generally indicate a recession.
Another Reuters poll showed there is a 35% chance of a British recession within 12 months.
In Asia, South Korea’s exports shrank about 13% year-on-year for the first 10 days of June, underscoring the growing risks to the region’s export-driven economies.
While Chinese exporters enjoyed solid sales in May, helped by an easing of domestic COVID-19 restrictions, many analysts expect a more challenging outlook for the world’s second-largest economy due to the Ukraine war and rising raw material costs. Is.
The Au Jibun Bank Flash Japan Manufacturing PMI slipped from 53.3 in May to 52.7 in June, the slowest expansion since February.
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