# Global factory activity weakens as demand falters
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-04-03
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Global Factory Activity Weakens as Costs Rise: Survey
Meta Description: Discover the latest data showing weakened global factory activity in March due to rising living costs, with challenges remaining for manufacturing companies.
URL: https://financedigest.com/global-factory-activity-weakens-as-demand-faltershtml

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By Jonathan Cable and Leika Kihara

LONDON/TOKYO (Reuters) – Global factory activity weakened in March as consumers feeling the pinch from rising living costs cut back, surveys showed on Monday, suggesting a deteriorating outlook will remain a drag on economic recoveries and keep policymakers on their toes.

Although factories across the euro zone saw a further decline last month, the cost of manufacturing fell for the first time since mid-2020.

S&P [Global’s final euro zone manufacturing Purchasing Managers’ Index](https://www.financedigest.com/2017-global-payroll-complexity-index-reveals.html "2017 Global Payroll Complexity Index Reveals ") (PMI) fell to 47.3 in March from February’s 48.5, just ahead of a preliminary reading of 47.1 but below the 50 mark separating growth from contraction for a ninth month.

An index measuring output, which feeds into a composite PMI due on Wednesday that is seen as a good guide to economic health, did however rise to a 10-month high of 50.4 from 50.1.

Today’s PMI [results highlight that challenges remain for manufacturing companies](https://www.financedigest.com/swiss-insurance-company-helvetia-uses-squirro-to-deliver-better-search-results-to-its-five-million-customers.html "Swiss insurance company Helvetia uses Squirro to deliver better search results to its five million customers"). Although consumer demand has largely held across sectors, this could lessen gradually,” said Thomas Rinn, global [industrial lead](https://www.financedigest.com/eu-announces-plans-to-lead-green-industrial-revolution.html "EU announces plans to lead green industrial revolution") at Accenture.

German manufacturing activity shrank in March at the fastest pace in almost three years, while weak demand continued to drag down France’s factory sector as purchasing managers [turned pessimistic about the 12-month outlook for their businesses](https://www.financedigest.com/6-expert-tips-to-turn-your-photography-passion-into-a-business-2.html "6 Expert Tips to Turn Your Photography Passion into a Business").

In Britain, outside the European Union, manufacturers also slipped, but did turn more optimistic about the future as cost pressures and [supply chain](https://www.financedigest.com/g7-finance-leaders-pledge-financial-stability-supply-chain-diversity.html "G7 finance leaders pledge financial stability, supply chain diversity") problems eased.

The improving supply chains and lower energy costs meant input prices fell in the euro zone for the first [time since](https://www.financedigest.com/soccer-arsenal-reach-womens-champions-league-semis-for-first-time-since-2013.html "Soccer-Arsenal reach Women’s Champions League semis for first time since 2013") July 2020 – just when the COVID-19 pandemic was cementing its grip.

But oil [prices surged](https://www.financedigest.com/explainer-oil-price-surge-changes-ecb-narrative-only-at-the-margins.html "Explainer-Oil price surge changes ECB narrative only at the margins") on Monday, posting the biggest daily rise in nearly a year, after a surprise announcement by OPEC+ on Sunday to cut more production, likely adding to inflationary pressures.

ASIAN STRAIN

Export-reliant Japan and South Korea both saw manufacturing activity contract in [March while growth](https://www.financedigest.com/uk-recruiters-slow-pace-of-pay-growth-in-march-rec-survey-shows.html "UK recruiters slow pace of pay growth in March, REC survey shows") in China stalled, highlighting the challenge facing Asia as authorities try to keep inflation in check and fend off headwinds from slackening global economic momentum.

With global growth set to remain weak in the coming quarters, we expect [manufacturing output](https://www.financedigest.com/spanish-manufacturing-output-down-for-6th-straight-month-in-dec-pmi.html "Spanish manufacturing output down for 6th straight month in Dec -PMI") in Asia to remain under pressure,” said Shivaan Tandon, emerging Asia economist at Capital Economics.

[China’s Caixin/S&P Global manufacturing PMI](https://www.financedigest.com/dollar-slips-yuan-gains-on-china-pmi-hot-inflation-lifts-euro.html "Dollar slips, yuan gains on China PMI; hot inflation lifts euro") stood at 50.0 in March, much lower than market forecasts of 51.7 and below February’s 51.6.

The reading echoed slower growth in an official PMI released on Friday.

The foundation for [economic recovery](https://www.financedigest.com/sme-productivity-programme-re-purposed-to-help-businesses-prepare-for-covid-19-economic-recovery.html "SME productivity programme re-purposed to help businesses prepare for Covid-19 economic recovery") is not yet solid. Looking forward, economic [growth will still rely on a boost](https://www.financedigest.com/uk-businesses-call-for-looser-immigration-rules-to-boost-growth.html "UK businesses call for looser immigration rules to boost growth") in domestic demand, especially an improvement in household consumption,” Wang Zhe, senior economist at Caixin Insight Group, said on China’s PMI.

South Korea’s PMI fell to 47.6 in March from 48.5 in February, its weakest in six [months as export orders took a hit](https://www.financedigest.com/european-shares-hit-nine-month-high-dollar-wobbles-after-powell-remarks.html "European shares hit nine month high, dollar wobbles after Powell remarks").

Japan’s final au Jibun Bank PMI stood at 49.2 in March, up from February’s 47.7 but remaining below the 50-threshold, as new [orders contracted for a ninth-consecutive month](https://www.financedigest.com/italys-leonardo-raises-fy-orders-guidance-after-strong-nine-months.html "Italy’s Leonardo raises FY orders guidance after strong nine months").

A separate central [bank survey released on Monday showed Japanese big](https://www.financedigest.com/big-banks-can-be-challengers-too.html "Big banks can be challengers too") manufacturers’ sentiment soured in January-March to its worst in more than two years, as weak external demand added to the struggle for firms already grappling with rising raw material costs.

India was a rare bright spot in the region, with its manufacturing [sector expanding at its quickest pace in three months in March on improved output](https://www.financedigest.com/japans-factory-output-posts-biggest-fall-in-8-months-on-weak-autos-chips-sectors.html "Japan’s factory output posts biggest fall in 8 months on weak autos, chips sectors") and new orders, suggesting its economy is better placed than most of its peers to weather a global slowdown.

Vietnam and Malaysia saw [factory activity](https://www.financedigest.com/asias-factory-activity-contracts-despite-chinas-covid-reopening.html "Asia’s factory activity contracts despite China’s COVID reopening") shrink in March, while that of the Philippines expanded at a slower pace than in February, surveys showed.

While supply disruptions caused by the pandemic have mostly run their course, weak chip [demand and fresh signs of slowdown in global](https://www.financedigest.com/artificial-intelligence-goes-global-demand-for-ai-reaches-four-continents-in-three-months-new-figures-from-synechron-show.html "Artificial Intelligence goes global: demand for AI reaches four continents in three months, new figures from Synechron show") growth have emerged as risks to many Asian economies.

The collapse [last month](https://www.financedigest.com/fintech-trends-to-look-out-for-during-the-last-six-months-of-2019.html "Fintech trends to look out for during the last six months of 2019") of two U.S. banks and the take-over of [Credit Suisse](https://www.financedigest.com/mitsubishi-ufj-to-postpone-at1-bond-issuance-in-credit-suisse-fallout.html "Mitsubishi UFJ to postpone AT1 bond issuance in Credit Suisse fallout") have added to uncertainty over the global outlook by causing market turbulence and shedding light on potential vulnerabilities in the world financial system.

While indications are that the U.S. Federal Reserve will pause its tightening cycle soon, the outlook remains clouded by the banking-sector troubles, still-high [inflation and slowing](https://www.financedigest.com/spains-12-month-inflation-slows-down-again-in-december-to-5-8.html "Spain’s 12-month inflation slows down again in December to 5.8%") global growth.

(Reporting by Jonathan Cable and Leika Kihara; Editing by Shri Navaratnam and Sharon Singleton)


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