The slump in the global manufacturing sector slowed down in June as countries relaxed coronavirus containment measures. An activity rebound in China and the US also offered hope that the world’s two most powerful economies may have passed the worst caused by the health crisis. However, persistently sluggish export demand and a fear of a new wave of infections capped any optimism on the outlook.
In its latest projections, the International Monetary Fund forecast the world’s economy to shrink by 4.9% in 2020 and rebound just 5.4% in 2021. The latest Reuters poll expected a more modest contraction of 3.7% but said the global GDP would fall by 6.0% in a worst-case scenario.
A survey by the Institute for Supply Management (ISM) showed the index of US factory activity jumped to 52.6 in June after three straight months of contraction. The reading passed the 50-point mark separating growth and contraction and was the strongest since April 2019.
In Asia, China’s unofficial PMI rose from 50.7 in May to 51.2 in June, the highest reading since December 2019. Japan’s PMI increased to a seasonally adjusted 40.1 last month, while South Korea’s PMI rose to 43.4 - both staying well below the 50-point threshold. Manufacturing activity also expanded in Vietnam and Malaysia. On the other hand, India’s factory activity shrank for a third consecutive month in June, albeit at a slower rate.
Meanwhile, the downturn in eurozone manufacturing continued in June but was not as bad as initially expected. The bloc’s manufacturing PMI was up from May’s 39.4 to 47.4 last month, beating the flash reading of 46.9. The contraction in German manufacturing also slowed down in June as it relaxed coronavirus-related restrictions. Factory activity in France also bounced back to modest expansion.
