LONDON: Factories across the globe slammed on the brakes last month as demand crashed, hit by the ongoing US–China trade war, slowing global growth and political uncertainty in Europe ahead of Britain’s imminent departure from the EU.
A slew of surveys on Friday highlighted how much manufacturers are suffering, particularly those exposed to China’s slowdown and added weight to expectations that policy tightening from central banks is pretty much over.
Euro zone manufacturing activity went into reverse for the first time in over five years last month, British factories slashed jobs and braced for Brexit while China’s vast manufacturing industry contracted for third month.
Japan’s factory gauge fell at the sharpest pace in two and a half years as slumping orders prompted plants to cut production, while data from South Korea showed its exports plummeted.
“All in all, it does suggest there is a lot of weakness out there. What’s driving it is those countries which are particularly exposed to China and they have taken a hit,” said Peter Dixon at Commerzbank. “Overall it doesn’t appear to have been a particularly strong start to the year.” IHS Markit’s February euro zone final manufacturing Purchasing Managers’ Index fell for a seventh month, coming in at 49.3, its first time below the 50 level separating growth from contraction since June 2013.
Giving little hope for a turnaround in the bloc’s fortune anytime soon, new orders fell at the fastest rate in almost six years, backlogs of work were run down, purchases of raw materials were curtailed and hiring remained weak.
Faced with a further slowdown in euro zone growth, the ECB will re-launch cheap bank loans as early as June and delay rate hikes to 2020 in a bid to stave off a recession, a Reuter’s poll predicted on Friday.
In Britain, which is due to leave the EU in less than a month, factories stockpiled goods at the fastest pace seen in any Group of Seven country since records started in the early 1990s in case the country fails to get a transition deal to smooth the shock of Brexit.
