LONDON/TOKYO/WASHINGTON- A slump in global manufacturing showed signs of easing in June as a rebound in Chinese and US activity offered some hope the world’s two largest economies may have passed the worst of the devastation caused by the novel coronavirus pandemic, while the collapse in European factory activity abated.
But sluggish global demand, the worsening US outbreak and fears of a second wave of infections elsewhere will tame any optimism on the outlook and keep pressure on policymakers to support their ailing economies.
Globally, the pandemic has infected more than 10 million people and killed more than 500,000. A resurgence in new cases in several countries, particularly the United States, has prompted some governments to backpedal on plans to reopen their economies and fueled concerns the worst is still to come.
“No intermission, no glass of bubbly, just straight into the second half of 2020. And the outlook? Better than the first half, but not as good as it could be,” ING’S Robert Carnell said.
In its latest projections, the International Monetary Fund expected the global economy to shrink 4.9 percent this year and rebound just 5.4 percent next year.
A recent Reuters poll put this year’s contraction at a more modest 3.7 percent but said the global economy would shrink 6.0 percent in a worst-case scenario.
Still, a series of business surveys released on Wednesday showed broad improvements in global manufacturing in June from depths hit in May and April. Activity in some economies swung to growth while declines in other places slowed.
The Institute for Supply Management (ISM) said its index of US factory activity jumped to a reading of 52.6 last month, unexpectedly vaulting over the 50 mark that separates growth from contraction. That was the strongest since April 2019 and ended three straight months of contraction.
Still, the US COVID-19 outbreak shows little signs of abating, with a record number of new cases of the respiratory illness recorded on Tuesday, and American consumers – the backbone of the US economy – growing ever more anxious.
“(W)ith the number of coronavirus cases now rising in many parts of the country, including several states where manufacturing activity is concentrated, the nascent recovery risks being curtailed by the re-imposition of lockdowns,” Gregory Daco, chief US economist at Oxford Economics, wrote in a note to clients.
Meanwhile, the downturn in euro zone manufacturing was not as bad as initially thought last month after more economies in the bloc eased restrictions imposed to quell the spread of the coronavirus, a survey showed. – Reuters
