Manufacturing slump eases as world continues anti-virus fight
Activity in some economies swung to growth while declines in other places slowed; Wall Street opens higher as rising hopes of a COVID-19 vaccine reversed premarket losses
A slump in global manufacturing showed signs of easing in June as a rebound in China’s activity offered some hope Asia may have passed the worst of the devastation caused by the coronavirus pandemic, while the collapse in European factory activity abated. US manufacturing activity also rebounded in June, hitting its highest level in more than a year as the broader economy reopened.
But sluggish global demand and fears of a second wave of infections will tame any optimism on the outlook and keep pressure on policymakers to support their ailing economies.
In its latest projections, the International Monetary Fund expected the global economy to shrink 4.9% this year and rebound just 5.4% next year.
A recent Reuters poll put this year’s contraction at a more modest 3.7% but said in a worst case scenario the global economy would shrink 6.0%.
Still, a series of business surveys released on Wednesday showed broad improvements in manufacturing across Europe and Asia in June from depths hit in April and May. Activity in some economies swung to growth while declines in other places slowed.
The downturn in eurozone manufacturing was not as bad as initially thought last month after more economies in the bloc eased restrictions imposed to quell the spread of the coronavirus, a survey showed.
With transmission rates of the virus falling in much of Europe, and economies opening up, IHS Markit’s final eurozone Manufacturing Purchasing Managers’ Index (PMI) moved closer to the 50-mark separating growth from contraction in June.
It rose to 47.4 last month, up from May’s 39.4 and comfortably ahead of an earlier flash reading of 46.9. An index measuring output jumped to 48.9 from 35.6.
Germany’s manufacturing sector also contracted at a slower pace as Europe’s largest economy lifted restrictions. Its economy will gradually recover and is likely to return to last year’s level at the end of 2021, economic institute Ifo said on Wednesday.
French factory activity bounced back to modest growth and in Britain, outside the currency union, the historic collapse eased further as companies reported a small increase in output.
In China, factory activity grew at a faster clip in June after the world’s second-largest economy lifted coronavirus lockdown measures, the Caixin/markit PMI showed.
Manufacturing activity also expanded in Vietnam and Malaysia, pointing to a slow but steady recovery ahead.
India’s manufacturing activity contracted for a third straight month in June but at a much slower pace, as both output and new orders shrank at softer rates.
Similarly, the export powerhouses of Japan and South Korea continued to see manufacturing activity decline, albeit at a softer pace.
Japan’s PMI rose to a seasonally adjusted 40.1 in June, while South Korea’s PMI ticked up to 43.4 - both remaining far below the rise-or-fall threshold of 50.
US manufacturers continued to recover in June from the sharp downturn caused by the coronavirus crisis, though the sector remained weak overall, according to an industry survey released on Wednesday.
The Institute for Supply Management’s (ISM) manufacturing index jumped to 52.6 per cent from 43.1 per cent in May, beating the consensus but in line with other economic indicators showing the easing of lockdowns implemented to stop the coronavirus was boosting the economy.
Meanwhile, US private payrolls increased less than expected in June and employers announced more than 170,000 layoffs, strengthening views that the labor market and broader economic recovery from the COVID-19 pandemic would be a long slog.
The ADP National Employment Report on Wednesday showed private payrolls increased by 2.369 million jobs last month. Data for May was revised up to show payrolls surging 3.065 million, in line with a surprise rebound in job growth reported by the government, instead of tumbling 2.76 million as previously estimated.
Economists polled by Reuters had forecast private payrolls increasing by 3.0 million in June.
Job growth has rebounded mostly as companies rehired workers laid off when businesses were shuttered in mid-march to control the spread of the respiratory illness. But some companies are struggling with weak demand forcing them to lay off workers.
Wall Street opened higher on Wednesday as rising hopes of a COVID-19 vaccine reversed premarket losses, overshadowing fears of another round of lockdowns following a record surge in coronavirus cases in the United States.
A COVID-19 vaccine developed by Pfizer and German biotech firm Biontech showed promise and was found to be well tolerated in early-stage human trials.
Gold prices dropped on Wednesday, having hit a near eight year-high earlier in the session. Spot gold fell about 1% to $1,763.69 per ounce by 1508 GMT, having earlier hit a peak since October 2012 at $1788.96. Oil prices rose about 1% on Wednesday following a drawdown in US crude inventories from record highs and a string of positive manufacturing data, but a surge in coronavirus cases tempered gains.