Global Factory Production Dips, but Supply Chains Improve: Kiplinger Economic Forecasts

The success of the global economy is affected by a multitude of factors. To help you understand what is going on and what we expect to happen in the future, our highly-experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest...

The global manufacturing sector continues to weaken. The latest data from the global manufacturing purchasing managers’ index suggest that, outside of Indonesia, India, Mexico, Russia and Turkey, factory activity is weak all over. 

China, the world’s workshop, is not immune to the trend. Manufacturing in China slowed in the second quarter, despite rapid growth in its domestic economy in the first quarter. Slowing growth across the world and a shift in consumption away from goods to services have dampened demand for Chinese goods. Factory output in the eurozone likely fell in the second quarter, despite easing supply disruptions and lower natural gas prices, due to the headwind caused by rising interest rates. 

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The good news is price pressures and supply chain issues are easing. The global PMI’s input costs and output price indexes are below pre-pandemic levels. Delivery times have improved significantly as supply chains continue to normalize.

Meanwhile, Russia's war on Ukraine also continues to impact the economy. The collapse of the Black Sea Grain Initiative could imperil farm exports from Ukrainian ports, with Russia no longer cooperating amid its conflict with Kyiv. The end of the deal could put some upward pressure on global food prices, which have declined by over 23% since their peak in March of last year. 

It’s possible China will try to revive the deal, which has benefited Beijing more than any other country. China has received 8.9 million tons of Ukrainian grain under the Black Sea Grain Initiative, roughly a quarter of the total amount shipped. The question is to what extent Beijing can wield its growing influence on Moscow.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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