Manufacturing Weakens in Europe, Asia on Faltering Demand And Tariff Uncertainties

Manufacturing was weak in Europe and Asia's biggest economies in November, business surveys showed on Monday, as subdued domestic demand and tariff uncertainties weighed.

The euro zone, China and Japan all saw manufacturing activity contract last month although there were bright spots for Britain and economies in Southeast Asia, which saw growth, purchasing managers' surveys showed.

Euro zone manufacturing activity slipped back into contraction territory last month, its purchasing managers' index (PMI) showed, and Germany's dominant manufacturing sector experienced a marked deterioration in business conditions.

While weakening demand in the euro zone forced firms to cut jobs at the quickest rate in seven months, in Germany new orders fell at the fastest rate in 10 months.

"Current conditions remain at best subdued, with output trending down from an already weak level, reflecting the combination of headwinds faced by the manufacturing sector, including tariffs, heightened Chinese competition and general economic uncertainty," noted Leo Barincou, senior economist at Oxford Economics.

"The persistent industrial slump appears to be putting pressure on headcount, with firms shedding jobs at the fastest pace since April. Meanwhile, weak demand means that firms were unable to transmit the rise in input costs to their selling prices."

In China, the world's largest manufacturer, factory activity slipped back into a slight contraction, a private-sector PMI showed, a day after Beijing's official measure showed activity falling for the eighth consecutive month albeit at a slower pace.

"Container throughput at Chinese ports was little changed last month compared to October. To the extent that demand did improve, it didn't do much to support production amid already high inventory levels - the output component dropped to a four-month low," said Zichun Huang, China economist at Capital Economics.

"And while the output price component edged up slightly, it stayed at a low level, pointing to persistent deflationary pressures."

MANUFACTURING PICKS UP IN BRITAIN

Among major European economies, France's manufacturing sector contracted further in November as a drop in production and slower demand for goods hit the sector.

S&P Global's survey said demand for French goods had continued to weaken in November, extending the current sequence of declining factory orders to three-and-a-half years.

Italy's manufacturing sector crept back into growth territory in November, a positive sign for the country's struggling economy.

In Britain, outside the European Union, the manufacturing sector recorded its first increase in activity since September 2024 last month, bolstered by improved domestic demand and less of a slowdown in orders from overseas.

Meanwhile, Asia's other manufacturing powerhouses also struggled with sluggish demand in November, extending declines in factory activity, as progress in U.S. trade negotiations failed to translate into a significant recovery in orders.

Japan's PMI showed new orders continued to decline, stretching the downturn to two-and-a-half years.

Across Asia this year, businesses in major exporting nations have been scrambling to navigate the uncertainty created by U.S. President Donald Trump's sweeping tariffs.

While Trump's trade deals with countries like Japan and South Korea and lowered tensions with China have given firms some confidence, many are still adjusting to the new U.S. trade reality.

South Korea's factory activity contracted for a second month in November. However, separate data showed Korean exports rose in November for a sixth consecutive month, beating market expectations, as chip sales hit a record on strong technology demand while autos also jumped after a U.S. trade deal.

Taiwan's PMI showed factory activity continued to fall, but at a slower pace.

Elsewhere in Asia, emerging market manufacturers remained outperformers with Indonesia and Vietnam both reporting brisk growth in factory activity and Malaysia swinging back to growth.

Source: Reuters