The outlook is bleaker in most advanced economies because of cooling Chinese manufacturing and uncertain global demand for electric vehicles
The International Monetary Fund believes that weaker global manufacturing output and international trade flows are hitting economic growth. Its latest World Economic Outlook notes that global growth has fallen sharply over the past year. ‘Among advanced economies, the weakening has been broad-based, affecting major economies (the United States and especially the Euro area) and smaller Asian advanced economies,’ the IMF says. ‘The slowdown in activity has been even more pronounced across emerging market and developing economies, including Brazil, China, India, Mexico, and Russia.’
The slowdown was also noted by Reuters in October when it reported that ‘China’s factory gate prices declined at their fastest pace in more than three years in September, reinforcing the case for Beijing to unveil further stimulus as manufacturing cools on weak demand and US trade pressures.
China’s National Bureau of Statistics put the manufacturing purchasing managers index (PMI) at 49.3% in October, down 0.5 percentage points from the previous month and only marginally above the lowest reported monthly PMI of 2019 (49.2% in February).
Indicators of US manufacturing and industrial production are weak and in October the Federal Reserve’s Beige Book reported that manufacturing activity had continued to edge lower. The Fed also said US industrial production decreased 0.4% in September, including a 0.5% drop in manufacturing output and 1.3% contraction in mining.
In Europe, the metal sector has remained weak in recent weeks. While scrap is still abundant, the demand side remains weak. One reason for this is the state of the European automotive industry. Sales are becoming increasingly difficult and the industry needs to know how much electric vehicles (EV) are to be favoured in future because there is no consistent approach across the continent.
As a result, carmakers are producing significantly less and that has a direct impact on suppliers. The pace of EV progress in China also appears to be stalling. According to the China Association of Automobile Manufacturers, EV production and sales in June rose year-on-year by 56.3% and 80% respectively. But the growth numbers for both had eased off to 29.9% and 34.2% in September.
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