Global Manufacturing Slows Amid Middle East Conflict and Rising Costs

Manufacturing activity in China slowed in July due to the ongoing war in the Middle East, which has disrupted global trade and driven up costs for manufacturers. The conflict has halted shipping through the Strait of Hormuz, a key transit route for energy exports from the Gulf, causing energy prices to surge.

According to surveys released on August 3, factories in China saw growth in new orders slow to its weakest pace since January. Meanwhile, euro zone output surged, but this was largely driven by firms clearing order backlogs rather than rising demand.

The S&P Global Eurozone Manufacturing PMI rose to 51.9 in July from June's 51.4, its highest reading since April but just below a preliminary estimate of 52.0. Carsten Brzeski at ING said that the euro zone economy is more resilient than feared, but 'we're clearly heading into at least a low growth environment.'

Inflation in the common currency bloc rose to 2.9 per cent in July from 2.8 per cent a month earlier, adding to an already strong case for another European Central Bank interest rate hike.