Tokyo, June 23 (BNA): Factory activity growth in Japan slowed to a four-month low in June as China’s COVID-19 restrictions disrupted supply chains, while many other economies in Asia also faced headwinds amid rising risks. On expectations likely. American recession.
Thursday’s data showed manufacturing activity in Australia stabilizing this month, which, along with Japanese numbers, comes ahead of a series of European and US Purchasing Managers’ Index (PMI) surveys due to be released later in the day, Reuters reports.
The readings will come under close scrutiny as financial markets worry about sharp rate increases by the Federal Reserve, and additional violent tightening planned over the coming months, dramatically raising the risks of a recession in the US.
“The global macroeconomic outlook has deteriorated materially since the end of 2021,” said Fitch Ratings, which lowered this year’s global growth forecast to 2.9% in June from 3.5% in March.
“Stagflation, characterized by persistently high inflation, high unemployment and weak demand, has become the dominant theme of risk since late Q1-22 and a potentially hazardous scenario,” it said in a report released this week.
A growing number of market players, including US investment firm Pimco, are warning of the risks of a recession as central banks around the world tighten monetary policy to fight persistently high inflation.
A string of recent data globally has shown that policy makers are walking a tightrope as they try to defuse inflationary pressures without pushing their economies into sharp deflation.
US retail sales unexpectedly fell in May and existing home sales plunged to their lowest level in two years, a sign of rising inflation and rising borrowing costs starting to hurt demand.
Britain’s economy unexpectedly contracted in April, adding to fears of a sharp slowdown as companies complain about rising production costs.
In Asia, South Korea’s exports for the first 10 days of June contracted by nearly 13% year-on-year, underscoring the growing risk to the region’s export-dependent economies.
And in China, while exporters enjoyed strong sales in May, buoyed by the easing of domestic COVID-19 restrictions, many analysts expect a more challenging outlook for the world’s second-largest economy due to the Ukraine war and rising raw material costs.
Thursday’s survey showed that Japan’s au Jibun Bank Flash manufacturing index fell to 52.7 in June from 53.3 in May, the slowest expansion since February.
In a sign of the continuing impact of the pandemic, auto giant Toyota Motor Corp. cut its global production plan for July by 50,000 vehicles as semiconductor shortages and disruptions in COVID-19 parts supplies continue to limit production.
“Despite the recent easing of lockdowns in China, supplier delivery times continued to lengthen last month, albeit at a slightly slower pace,” said Marcel Thilliant, chief Japanese economist at Capital Economics.
The key for Japan will be whether consumption bounces back hard enough from the recession caused by the pandemic, to offset emerging external headwinds such as the expected US slowdown, analysts say.
PMIs for France, Germany, the eurozone, Britain and the United States are due out later on Thursday.