Friday, January 28, 2022

Factories Facing Supply Headaches Emerge As Omicron Risk

Global factory activity accelerated in November, according to surveys published on Wednesday, although supply bottlenecks remained, putting a cap on production and rising raw material costs.

At the end of the month, the newly detected Omicron coronavirus outbreak emerged as a new concern for policymakers, who are already trying to recover the economy and tame inflation.

November’s surveys likely did not reflect the spread of the variant, which could further strain pandemic-disrupted supply chains, with many countries imposing new border controls to lock themselves in place.

“The Omicron version … could be a game-changer: If Britain and other countries go into another lockdown the shortage of inputs and labor will worsen for manufacturers,” said Samuel Tombs at Pantheon Macroeconomics.

IHS Markit’s final Manufacturing Purchasing Managers’ Index (PMI) for the euro area nevertheless rose to 58.4 in November from 58.3 in October, shy of the initial 58.6 “flash” estimate, but still resting, separating growth from contraction. above 50 points.

FILE: Christmas shoppers wear masks and fill Cologne’s main shopping street Hohe Strae (High Street) during the COVID-19 pandemic in Cologne, Germany December 12, 2020.

Supply chain issues have made it a sellers market for raw materials and the input price index was below October’s record high and factories in the region passed on rising costs to customers at the fastest rate in the survey’s history.

This suggests that overall inflation in the bloc, which preliminary official data showed on Tuesday hit a record high of 4.9% last month, will continue to monitor the European Central Bank’s target of 2.0%, putting pressure on the bank to act.

In Britain, outside the European Union and the euro area, more manufacturers than at any time in the past 30 years reported rising costs last month, underscoring pressure on the Bank of England to raise interest rates.

The BoE will be the first major central bank to raise interest rates, possibly as early as this month, a November Reuters poll predicted.

Federal Reserve Chairman Jerome Powell said on Tuesday that US central bankers will discuss in December whether to phase out their bond purchases a few months earlier, prompting a sharp rise in short-term Treasury yields.

china breaks up

China’s factory activity fell into contraction in November, the private Caixin/Market Manufacturing PMI showed, as soft demand and increased prices hurt manufacturers.

The findings of the private sector survey, which focused more on smaller firms in coastal regions, contrasted those in China’s official PMI on Tuesday, which saw an unexpected increase in manufacturing activity in November, albeit at a very modest pace. From.

“Easing bottlenecks on the supply side, especially easing power shortages, has accelerated the pace of production recovery,” Wang Zhe, senior economist at Caixin Insight Group, said in a statement accompanying the data release.

“But demand was relatively weak, suppressed by the COVID-19 pandemic and rising product prices.”

Beyond China, however, factory activity improved with the expansion of PMI to countries in Japan, South Korea, India, Vietnam and the Philippines.

Japan’s PMI hit a nearly four-year high, while South Korea’s PMI rose.

India’s manufacturing activity grew at the fastest pace in 10 months in November, fueled by a sharp jump in demand. Taiwan’s manufacturing activity continued to expand and Indonesia had a similar picture.

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This article is republished from – Voa News – Read the – original article.

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