Global manufacturing slumps as factory output drops in July

Global production falls for the second time in three months as business confidence weakens.

Global manufacturing has slipped back into decline, with factory output falling across most major economies in July as companies grapple with weak demand and tariff concerns.

The closely-watched J.P.Morgan Global Manufacturing PMI dropped to 49.7 last month, down from 50.4 in June and below the crucial 50 mark that separates growth from contraction.  The index tracks business conditions across more than 40 countries representing 98% of world manufacturing.

Manufacturing output declined for the second time in three months, with all major sectors - consumer goods, intermediate products, and investment goods - recording falls. New orders dropped for the third time in four months whilst export orders fell for the fourth consecutive month.

India remained the standout performer, leading global manufacturing growth alongside Vietnam and Thailand. The eurozone continued expanding for a fifth straight month, driven by strong performances in Ireland and Spain, with modest gains in Greece, the Netherlands, Germany, and Austria.

However, major economies struggled. China and Japan both fell back into contraction after brief recoveries in June, whilst the US managed only mild growth. Canada and Mexico continued steep declines, though at slower rates than previously.

Taiwan recorded the world’s sharpest downturn, followed by Turkey and Poland.

Manufacturers cut staff for the 12th consecutive month across all sectors, reflecting continued caution about market conditions. Companies also reduced inventory levels and purchasing volumes.

Input costs and selling prices remained broadly stable, though price pressures were generally stronger in developed nations than emerging markets.

Maia Crook, global economist at J.P.Morgan, said the decline reflected expectations “for global manufacturing to stall in the second half of the year” as industry faces tariff-driven hits to consumption and an unwinding of previously front-loaded production.

Business confidence about the year ahead fell to a three-month low, suggesting manufacturers remain wary about future prospects despite some regional bright spots.