Global factory output took a fall in the month of August, raising concerns of a global recession.
Export orders slumped throughout the United States and European Union, resulting in a big drop in stock markets. In the EU, there was a general slowdown in factory activity, with the United Kingdom seeing the fastest rate of contraction in about two years.
Export orders in Taiwan and South Korea also shrank.
Factory activity in the US slowed significantly, though managed to perform better than analysts had predicted. The Purchasing Managers’ Index (PMI), which asses industry performance through production, new orders, supply, inventory and employment, was down 0.3 points to 50.6 in the US, whereas economists had predicted it to fall as low as 48.5, according to Reuters.
China released its official PMI figures, showing a marginal increase for the first time since March. But a report from HSBC, which unlike the government looks more at privately-owned than state-run companies, showed that factory activity was actually slowing across the board.
Jeavon Lolay, Senior Economist at Lloyd’s TSB, said figures indicate that while the world’s economies are on the mend, they have not yet fully recovered from the global financial crisis. “The economies are very vulnerable to any shock, which at this moment in time there are a few of,” said Lolay. “What is happening in the Euro zone is very important, and in the US growth has weakened markedly in the last two quarters. There is a risk of a return to recession.”
EU Manufacturing Slowdown
Markit Group’s index for factory activity in the Euro zone dropped 1.4 points to 49, despite more optimistic forecasts of 49.7 for the month. This is the first time since September 2009 that the PMI has dipped under 50, indicating a contraction.
Leading the manufacturing slowdown were the Euro zone’s two largest economies, Germany and France, which had been propping up figures over the past two years. New customer orders were down for the third month in a row in August, with the sub-indicator index falling to 46, 1.6 points lower than the previous month.
Affected by the manufacturing slowdown in the Euro zone, Switzerland reported its slowest economic growth since 2009, with the elevated Swiss franc punishing the country’s exporters.
The slow activity in the US and Europe may drag Asia’s export-dependent economies with them, which could push the world once more to the brink of global recession.
Key Statistics – Global Purchasing Managers Index (source: JP Morgan)
- The global Purchasing Managers’ Index (PMI) fell to 50.1 in August, 0.6 points lower than the previous month.
- PMI in the US was at 50.6, 2.1 points higher than expected for the month of August, but still the weakest factory activity since July 2009.
- PMI in the UK fell to 49, its lowest since May 2009.