According to foreign media reports, the latest data shows that due to weak demand, manufacturing activity in the US and Europe continued to shrink in June, further dragging down the process of economic recovery.
On July 1st local time, data released by the Institute for Supply Management (ISM) showed that the Purchasing Managers Index (PMI) for the US manufacturing industry in June fell from 48.7 in May to 48.5, marking the third consecutive month of contraction.
The PMI index is divided by 50 points. A score above 50 indicates industry expansion, while a score below 50 indicates industry contraction. From the sub index perspective, the new order index is 49.3, higher than the previous value of 45.4. Although it is still in the contraction range, the monthly rebound is relatively large; The production index fell from 50.2 to 48.5, entering a contraction range; The price payment index is 52.1, a significant drop from the previous value of 57, which is the lowest value since December last year; The employment index is 49.3, lower than the previous value of 51.1.
By industry, eight manufacturing industries, including primary metals and chemical products, have seen growth; Nine industries, including machinery, transportation equipment, electrical equipment, electrical appliances and components, as well as computer and electronic products, have experienced contraction.
According to Reuters, there have been 19 months of contraction in the US manufacturing industry in the past 20 months. In March of this year, the US ISM manufacturing PMI briefly broke through the boom bust divide, ending 16 consecutive months of contraction, but quickly returned to the contraction range. According to analysis, the US manufacturing industry is under pressure from high interest rates and weak demand for goods.
Industry insiders believe that the outlook for the US manufacturing industry is not optimistic. Timothy Fior, Chairman of the ISM Manufacturing Survey Committee, stated that due to the tightening of monetary policy, manufacturers have a low willingness to invest. Oliver Allen, Senior American Economist at the Temple of the Gods Macroeconomic Research Company, predicts that the US manufacturing industry will remain weak in the coming quarters, and it is only possible to change this situation if financial conditions are further relaxed.
Since March 2022, the Federal Reserve has cumulatively raised interest rates by 525 basis points to combat inflation. Since July last year, the Federal Reserve has maintained its benchmark interest rate in the range of 5.25% to 5.50%. Reuters reported that financial markets currently expect the Federal Reserve to start cutting interest rates in September, but the Fed's recent statement has sent a more hawkish signal.
Meanwhile, a report released by S&P Global on July 1st showed that the manufacturing situation in the eurozone is also deteriorating. The final value of the HCOB Eurozone Manufacturing PMI compiled by the institution for June decreased from 47.3 in May to 45.8, far below the 50 boom bust line and the long-term average of 51.6. Except for Italy, all Eurozone countries saw a decline in their June PMI index.
S&P analysis suggests that poor manufacturing data is mainly due to reduced production, orders, and employment. Among them, the Eurozone New Orders Index decreased from 47.3 in May to 44.4, indicating weak market demand.
