Average goods prices charged by factories fall worldwide again in June

The rate of decline accelerated, reflecting a second month of falling input prices, a commentary by Chris Williamson, chief business economist at S&P Global Market Intelligence, noted.

Improved supply chains, lower energy prices and subdued demand have all contributed to growing deflation in the global manufacturing economy.

However, these deflationary forces were partially offset in June by historically elevated wage pressures, which hint at some stubborn stickiness of core inflation, the commentary said.

Falling prices, or lower inflation rates, were observed in almost all monitored economies.

Manufacturing output prices—average charges levied for goods leaving the factory gate—fell worldwide for a second month running in June, dropping at the sharpest rate since May 2020.

If the early COVID-19 lockdown months are excluded, the fall in prices was the sharpest since February 2016, according to the latest PMI surveys compiled by S&P Global.

The declines represent a marked reversal of the inflation trend, with the survey having seen record increases in factory selling prices just over a year ago, the commentary noted.

Recent months have witnessed an improvement in supply chains, and pricing power has shifted to the buyer, as shortages and supply chain delays have disappeared, replaced in many cases by situations of excess supply, it said.

This excess supply has been in part a result of a growing shift toward inventory reduction, as manufacturers, their suppliers and their customers seek to reduce stock holdings for cost considerations in the face of disappointing demand, it added.

Of the 31 economies for which S&P Global manufacturing PMI data are available, selling prices fell in 19, albeit in some instances only marginally. Australia reported the steepest decline, followed by Poland, Austria, Italy and Brazil.

In all cases except Taiwan, mainland China and Greece, either the rate of deflation accelerated or prices fell after having risen in May.

Prices rose at increased rates in Turkiye, India and Russia, although the steepest rate of increase was again reported in Indonesia, followed by Turkiye and Japan.

Among major economies, the euro zone is witnessing the sharpest rate of manufacturing selling price deflation, followed by mainland China.

Fibre2Fashion News Desk (DS)