European factories struggled last month as China fretted ahead of Trump tariffs By Reuters
Written by Jonathan Cable
(Reuters) – Manufacturing activity fell sharply across Europe last month and a further drop in demand dampened hopes for an imminent turnaround, while Chinese factories extended their recovery, a survey showed.
China’s rise is being driven in part by Beijing’s stimulus measures and a rush to export tariffs proposed by US President-elect Donald Trump who returns to the White House in January.
Trump’s tariffs will also have a major impact on the already struggling eurozone economy, a Reuters poll found last month.
The final HCOB euro zone manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 45.2 in November, in line with the initial estimate and below the 50 mark that separates growth from contraction.
In October it was 46.0 and the headline reading was at a 50-year low since mid-2022.
Manufacturing activity in Germany, Europe’s largest economy, remains entrenched in contracted territory while France saw the biggest drop in new orders since the first wave of the COVID-19 pandemic in 2020.
In Britain, outside the European Union, its PMI pointed to the sharpest contraction in nine months, as orders from domestic and foreign customers fell.
S&P cited headwinds from a 25 billion pound ($32 billion) increase in employment taxes in the new Oct. 30 of the Labor government, a 7% British wage increase, disruption to Red Sea shipping and the threat of global tariffs.
“The UK follows the weak results also shown in the European PMI data, and it shows that across the UK and the euro area, manufacturers are feeling very downbeat,” said Cara Haffey at PwC.
“In particular, small manufacturers are seeing a decrease in order and production volumes.”
ASIA IS ON THE RISE
Asia’s biggest manufacturing economies increased activity in November, and China’s factories extended their recovery, driven in part by Beijing’s momentum and a rush to export, although weak spots in other parts of the region hinted at some challenges.
China’s factory activity expanded at the fastest pace in five months in November as new orders, including those from abroad, led to a strong increase in output, the Caixin PMI showed.
That largely matched the modest increase in manufacturing activity seen in an official survey released on Saturday, suggesting the blitz of stimulus is finally making its way into the world’s second-largest economy.
China’s development helped other Asian industrial powerhouses such as South Korea and Taiwan, where work began.
Xing Zhaopeng, ANZ’s chief strategist for China, said China’s recovery was largely driven by exports.
“Both the new export orders in the official PMI and the Caixin PMI suggest that consumers were rushing to place orders. But China’s domestic demand was still weak as the official non-manufacturing PMI was 50,” Xing said.
Many Chinese exporters are trying to get their goods to major markets ahead of tariffs from the US and the European Union, which are among several risks that policymakers now need to navigate.
Beijing launched a series of major stimulus packages in the second half of this year to stem a sharp decline in spending and productivity.
While analysts say more is still needed to develop a strong recovery, there are signs that this year’s measures have had an impact on retail spending and the stability of the property market.
Elsewhere in Asia conditions worsened, with Japan’s PMI reporting the fastest decline in employment in eight months as factories adjusted production on weak demand.
That was partially offset by official data showing Japanese corporate spending on manufacturing and services rose sharply in the third quarter.
India’s factory employment growth has remained brisk but has slowed due to continued price pressures.
Official data on Friday showed that Asia’s third-largest economy, one of the world’s best performers, expanded at a weaker-than-expected pace in the July-September quarter, weighed down by sluggish growth in production and consumption.
In Southeast Asia, PMIs showed factory activity extending a decline in Indonesia and Malaysia and slowing expansion in Thailand and Vietnam.
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