Global manufacturing sector hits 6-month low in June 2023: JP Morgan

Factory output declined in June, having risen during the past four months due to easing supply chain constraints and the lifting of restrictions in mainland China. The main factor underlying lower production was a further contraction in new order intakes, which fell for the twelfth successive month.

Only ten out of the 29 nations for which June data were available saw production increase, seven of which were located in Asia (including growth in India and mainland China). Sector data showed output falling in the intermediate and investment goods sectors and stagnating at consumer goods producers, as per the report.

International trade flows remained especially weak, as new export business contracted for the sixteenth successive month. The rate of decline accelerated to the strongest in six months, with reductions signalled in the US, euro area, Japan, South Korea, and Brazil (among others), while mainland China saw only a negligible increase.

The current sustained weakness of the demand environment led to an increasingly cautious approach from manufacturers. Staffing levels were broadly unchanged during June, purchasing activity was cut back to the greatest extent since January and stocks were depleted as companies freed up funds. The dearth of demand also led to backlogs of work being reduced for the twelfth month in a row.

Business optimism was less upbeat in June. Although manufacturers (on average) still forecast output to rise over the coming year, the overall degree of positivity dipped to its lowest since last November. Confidence was at a six-month low in the US, an eight-month low in mainland China and a seven-month low in the euro area (with France and Germany forecasting output to fall over the coming 12 months). Japan was one of the rare exceptions that saw sentiment strengthen.

There was better news on the supply and price fronts during June. Average vendor lead times shortened for the fifth month running, albeit to the least marked extent since February. Input costs fell for the second straight month, with the steeper rate of decline (on average) in developed nations compared to their emerging market counterparts. Average selling prices also posted back-to-back decreases in May and June.

Fibre2Fashion News Desk (DP)