Manufacturing growth slowed as China’s Covid-19 embargo and Russia’s war conflict over Ukraine disrupted the supply chain, while the growing risk of a recession in the United States posed a new threat to the global economy.
Soaring prices in the European zone have dragged demand for manufactured goods to fall in June at the fastest rate since May 2020 when the Covid-19 outbreak was underway. Coupled with the Purchasing Managers ’Index (PMI) of key S&P Global factories fell to a nearly two -year low of 52.0 from 54.6.
A Reuters survey even predicted a more modest decline to 53.9 and the index approached the 50 level separating growth from contraction.
According to Jack Allen-Reynolds at Capital Economics, “The European zone PMI survey shows a further slowdown in the services sector, while production in the manufacturing sector now appears to be falling directly,”.
There is about one in three for the occurrence of recession in the European zone in 12 months according to economists in a Reuters survey.
Jerome Powell, chairman of the Federal Reserve, said on Wednesday the central bank was not trying to push for a recession in the United States in order to stop inflation but was fully committed to controlling prices. Inflation continues to run at least three times higher than the Fed’s target level of 2% and it is expected to raise another 75 basis point interest rate hike next month.
U.S. investment firms PIMCO warned on Wednesday that central bank action to tighten monetary policy in the fight against persistently high inflation could increase the risk of a recession.
“The global macroeconomic outlook has declined significantly since the end of 2021,” said Fitch Ratings, which reduced its global growth forecast this year to 2.9% in June from 3.5% in March.
At the same time, U.S. retail sales suddenly fell in May and existing home sales declined to their lowest level in two years, signs of high inflation and rising borrowing costs began to weigh on demand.
