Daily Management Review

Global Manufacturing Output Had A Modest Closure To 2023


Global Manufacturing Output Had A Modest Closure To 2023
With the euro zone's activity declining in December for the eighteenth consecutive month and Asia's industrial powerhouses suffering from China's erratic economic recovery, global factories had a poor end to 2023.
A number of factory purchasing managers' indices that were released on Tuesday cast doubt on the recent surge in financial markets confidence by demonstrating a prolonged downturn and indicating that any rebound this year would require time.
S&P Global's HCOB's final euro zone manufacturing Purchasing Managers' Index (PMI) increased slightly from 44.2 in November to 44.4 in December, although it still considerably below the 50 level, which denotes expansion in activity.
The trend suggests that the GDP of the euro zone shrank in the most recent quarter, and in December, manufacturing activity in Germany, the largest economy among the 20 member states of the bloc, shrank as well.
Based on official figures, the economy of the euro zone shrank by 0.1% in the third quarter; hence, a second quarter contraction would qualify as a recession under technical definitions.
"Euro zone manufacturing remained under pressure at the end of 2023," said Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics. "Looking ahead, the slight increase in optimism regarding the year-ahead outlook is a silver lining, but a slim one."
Although it was somewhat ahead of the 44.1 flash estimate, the index of manufacturing output in the euro zone, which feeds into a composite PMI that is expected on Thursday and is considered a good indicator of economic health, decreased to 44.4 from November's final reading of 44.6.
The manufacturing sector in Britain also had a setback. After three months of improvement, the S&P Global/CIPS manufacturing PMI final index in December dropped to 46.2.
Further information on whether there was, as indicated by preliminary readings, a decline in U.S. manufacturing activity towards the end of 2023 will be provided by data that is expected later on Tuesday.
Last month, factory activity in Asia was still struggling, particularly in economies that depended heavily on technology.
Taiwan's manufacturing activity continued to drop for the 19th consecutive month, while South Korea's factory activity fell back.
Contrary to Beijing's official PMI, which was announced on Sunday and stayed in contraction zone for the third consecutive month, China's Caixin PMI indicated a surprise uptick in activity in December.
The prognosis for China's main trading partners remains clouded by the country's varied economic prospects.
"Overall, the economic outlook for (China's) manufacturing sector continued to improve in December, with supply and demand expanding and price levels remaining stable," Wang Zhe, Senior economist at Caixin Insight Group, said.
"However, employment remained a significant challenge, and businesses expressed concerns about the future, remaining cautious in areas including hiring, raw material purchasing, and inventory management."
Beijing has implemented a number of measures in recent months to support a weak post-pandemic recovery, but the world's second-biggest economy is finding it difficult to pick up steam due to a severe real estate collapse, dangers associated with local government debt, and weak global demand.
In other parts of Asia, PMI data revealed that industrial sector activity in Malaysia and Vietnam continued to be in contractionary mode, notwithstanding a minor acceleration in Indonesia.
On Wednesday, India will reveal its PMI for the previous month, and on Thursday, Japan will release its.
Even though Asia's PMIs for December were largely negative, other recent data suggests the post-pandemic rebound in the area is beginning to gather momentum.
Stronger building and manufacturing helped Singapore's gross domestic product grow faster in the December quarter compared to the same period last year, according to figures released on Monday.
According to figures released on Monday, South Korea's exports increased in December as well, albeit more slowly, as strong global sales of semiconductors were offset by weaker Chinese demand.