Middle East Conflict Hits Global Manufacturing Activity

Manufacturing activity in China slowed in July due to weaker demand and elevated costs resulting from the ongoing war in the Middle East. The conflict has disrupted shipping through the Strait of Hormuz, a key transit route for Gulf energy exports, leading to higher energy prices for manufacturers.

The S&P Global Eurozone Manufacturing PMI rose to 51.9 in July from June's 51.4, its highest reading since April, but still below the preliminary estimate of 52.0. A reading above 50.0 indicates growth.

Despite this, Carsten Brzeski at ING stated that 'it's a mixed bag, but with the main conclusion 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 the case for another European Central Bank interest rate hike. This would likely add a further constraint on demand as households curtail spending.