A man walks past Bank of Japan's headquarters in Tokyo, Japan, June 17, 2022. REUTERS/Kim Kyung-Hoon
LONDON/TOKYO/NEW YORK, July 22 (Reuters) – The global economy looks increasingly likely to be heading into a serious slowdown, just as the highest inflation in a generation prompts central banks to aggressively reverse the ultra-loose monetary policy adopted during the pandemic to support growth, data showed on Friday.
Business activity in the United States, the world's largest economy, contracted for the first time in nearly two years this month, activity in the euro zone retreated for the first time in over a year, and growth in Britain was at a 17-month low, purchasing managers' surveys said on Friday. read more
In another ominous sign for the global economy, Japan's government is expected to sharply cut its forecast for domestic growth.
Meanwhile, China's strict COVID-19 lockdowns and Russia's invasion of Ukraine have further damaged global supply chains that had not yet recovered from the pandemic.
S&P Global on Friday said its preliminary – or "flash" – U.S. Composite PMI Output Index had tumbled far more than expected to 47.5 this month from a final reading of 52.3 in June. That was the fourth straight monthly drop and was driven by weakness in the services sector, which contracted enough to offset moderate growth in manufacturing. read more
With a reading below 50 indicating business activity had contracted, the report will feed the vocal debate over whether the U.S. economy is back in – or near – a recession after rebounding sharply from the downturn in early 2020 at the start of the COVID-19 pandemic.
"The preliminary PMI data for July point to a worrying deterioration in the economy," S&P Global Chief Business Economist Chris Williamson said in a statement. "Excluding pandemic lockdown months, output is falling at a rate not seen since 2009 amid the global financial crisis."
In the euro zone, business activity unexpectedly contracted this month due to an accelerating downturn in manufacturing and a near-stalling of service sector growth as burgeoning costs pushed consumers to cut back on expenditure, a survey showed.
S&P Global's flash Composite Purchasing Managers' Index (PMI) for the euro zone, seen as a good gauge of overall economic health, fell to 49.4 in July – the lowest since February 2021 – from 52.0 in June, well below all forecasts in a Reuters poll that had predicted a more modest dip to 51.0.
Businesses across the euro zone continued to report mounting inflation pressures and an acceleration in wage growth, even as the overall growth outlook becomes increasingly murky, the European Central Bank said on Friday, based on a survey of 71 major firms. read more
Inflation in the currency union was 8.6% last month, official data showed, and on Thursday the ECB raised interest rates by more than expected, confirming that concerns about runaway inflation now trump growth considerations. read more
The U.S. Federal Reserve, battling 40-year high inflation, is forecast to deliver another hefty 75 basis point interest rate hike at its meeting next week.
The Reuters poll gave median predictions of a 40% probability of a U.S. recession over the coming year and a 50% chance of one happening within two years, a significant upgrade from a June survey.
China and Japan remain exceptions by keeping monetary policy loose, a sign their economies – the second- and third-largest in the world – lack strength to offset the weaknesses in other parts of the globe.
Worries over a global slowdown are casting a shadow over Asia's recovery prospects with factory activity growth slowing in Japan and Australia, keeping pressure on policymakers to support their economies.
Japan's manufacturing activity grew at the slowest pace in 10 months in July, its PMI survey showed on Friday, boding ill for an economy struggling to shake the wounds from the pandemic. read more
"July's PMIs suggest that the manufacturing sector is slowing as demand weakens, while the latest COVID-19 is starting to hit the services sector," Marcel Thieliant, senior Japan economist at Capital Economics, said on Japan's PMI.
Factory activity also slowed in Australia with the index falling to 55.7 in July from 56.2 in June, a separate survey showed on Friday.
China's economic growth slowed sharply in the second quarter, weighed by widespread COVID lockdowns and pointing to persistent pressure over coming months from a darkening global outlook. read more
The slowdown in the world's second-largest economy, as well as the fallout from aggressive central bank tightening, forced the Asian Development Bank to slash its growth forecast for the region on Thursday. read more
Our Standards: The Thomson Reuters Trust Principles.
Thailand plans to raise its mininum wage for the first time in more than two years, by 5% to 8% to help workers cope with the impact of the pandemic, according to the national wage committee and the labour minister.
Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people worldwide every day. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers.
Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology.
The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs.
The industry leader for online information for tax, accounting and finance professionals.
Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile.
Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts.
Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks.
All quotes delayed a minimum of 15 minutes. See here for a complete list of exchanges and delays.
© 2022 Reuters. All rights reserved