Near-term manufacturing trends, by country (November PMI data)

Pockets of resilience become harder to find, as three quarters of countries post a contraction

The lowest Purchasing Managers’ Index (PMI) figure in two and a half years and the first contraction in global manufacturing employment since Q3 2020 signal the beginning of a likely global recession. As demand falls and high prices bite, MNCs should expect conditions to get worse before they get better. Where possible, MNCs struggling with sales should tailor their offerings with price sensitivity in mind, through actions such as discounting. Around the world, pockets of resilience still exist, but they are becoming rarer. These are mainly found in oil exporters, as well as in India and certain Southeast Asian countries.


Global manufacturing PMI fell further in November as three quarters of countries surveyed posted a contraction and the headline figure reached a 29-month low. The fall was attributed predominantly to falls in demand as well as high prices, and November saw the first contraction in manufacturing employment in over two years. The narrative was similar in the US, which registered its first sub-50 figure since the first COVID-19 lockdowns; inflation and expectations of a slowdown in activity continue to dampen demand, leading manufacturers to cut down on output and slow hiring. 

In the eurozone, a slightly better headline figure should not fool observers—the improvement is due to softening inflation and increased ability to clear backlogs, themselves a product of dwindling demand. In fact, every country’s manufacturing sector is in a state of contraction, with Germany, the Netherlands, and Spain being particularly affected. The outlook is darker yet in Eastern Europe, particularly in Poland and the Czech Republic, as the region reels from high energy prices and lower demand from trading partners.

China’s manufacturing sector continues to be hobbled by the country’s draconian and unpredictable zero-COVID measures, which weigh on capacity, demand, and confidence. In the rest of Asia, ASEAN countries that were until now proving resilient are showing signs of sputtering, as post-lockdown booms begin to fade. Indonesia and Thailand’s manufacturing sectors continued to expand but at a slower pace, while Vietnam’s slowed sharply. In Taiwan, subdued global demand for semiconductors is keeping PMI at record-low levels. Finally, India continues to be a bright spot for the region, with strong demand and confidence leading to sustained job creation in the sector.

Elsewhere, election results are weighing either positively (in the case of Kenya) or negatively (in the case of Brazil) on confidence. In the MENA region, commodity exporters continue to enjoy a favorable economic environment, while others—such as Egypt—struggle with volatility.

Our View

Across the global landscape, manufacturing sectors are converging on a common issue: falling demand. As inflation and aggressive monetary tightening pump the brakes on economic activity, manufacturers are seeing falls in their order books, forcing them to reduce output. Lower demand has also led to a build-up in inventories of finished goods, which could prove a further drag on production in the coming months. Meanwhile, falls in employment, so far contained to certain countries, are likely to become more widespread. 

This gloomy picture has its advantages, however. Lower demand will result in lower input cost pressures, which should make their way down the supply chain and result in lower end-product inflation in 2023. Weaker order books also have the benefit of easing supply chain snarls and allowing manufacturers to work through backlogs many have had since the early days of the pandemic. A notable exception to this is China, where operational disruptions and supply chain issues remain ever present due to zero-COVID disruptions, which FrontierView expects to continue throughout 2023.

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