Global Factory Outlook Mixed as Europe Stabilizes and Asia Struggles Amid U.S. Trade Uncertainty

 Manufacturing activity showed tentative signs of stabilization in Europe in June, while much of Asia continued to grapple with sluggish demand, exacerbated by uncertainty surrounding U.S. trade policy and the lingering effects of a fragile global recovery.

According to S&P Global, the eurozone’s HCOB Manufacturing Purchasing Managers' Index (PMI) inched up to 49.5 in June from 49.4 in May—its highest level since August 2022. Although still below the critical 50 mark that separates growth from contraction, the marginal improvement offered cautious optimism.

“There are signs of some stabilisation in the manufacturing sector,” noted Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. “Production has expanded modestly for the fourth consecutive month, order intake has ceased declining, and slightly longer delivery times suggest demand is beginning to pick up.”

However, performance across the euro area was uneven. Ireland led the bloc with a 37-month high PMI, while Greece, Spain, and the Netherlands also posted expansionary readings. Germany, Europe's largest economy, saw its PMI rise to a near three-year high, though it remained in contraction territory. In contrast, France, Italy, and Austria recorded accelerated downturns, weighing on the bloc's overall output.

In the United Kingdom, which is no longer part of the European Union, manufacturing also showed early signs of recovery, potentially signaling a turning point in its prolonged industrial slowdown.

Tariff Tensions Cloud Outlook in Asia

Meanwhile, factory activity across much of Asia remained subdued, reflecting the broader uncertainty caused by U.S. President Donald Trump’s aggressive tariff policy. As global trade partners brace for a July 9 deadline that could see tariff hikes reinstated, policymakers gathered at the European Central Bank’s annual summit expressed growing concern over the potential dismantling of the post-war global economic order.

Despite the challenges, some pockets of resilience emerged in Asia. Japan’s final au Jibun Bank PMI rose to 50.1, marking its first expansion in over a year, driven by an uptick in output. However, weak new orders and persistent concern over U.S. tariffs continued to restrain overall demand.

South Korea’s manufacturing sector contracted for the fifth consecutive month, although the pace of decline moderated following a snap presidential election that ended a prolonged period of political uncertainty. Still, exports to both the United States and China remained subdued.

China offered mixed signals. The Caixin/S&P Global Manufacturing PMI rose unexpectedly to 50.4 in June, buoyed by a rise in new orders, defying the government’s official PMI which showed a third consecutive month of contraction. Analysts caution that unresolved trade negotiations with the U.S. and domestic demand constraints could limit sustained recovery.

“The external environment remains severe and complex, with rising uncertainties,” said Wang Zhe, economist at Caixin Insight Group. “Effective domestic demand is yet to see a fundamental improvement.”

India Emerges as a Bright Spot

India stood out as a regional outperformer, with manufacturing activity accelerating to a 14-month high. A surge in international orders drove a record pace of hiring, signaling robust momentum in Asia’s third-largest economy even as its neighbors struggled with geopolitical and trade headwinds.

Global Stakes Rise Ahead of Trade Deadlines

As global negotiators work against the clock to reach agreements with the U.S. before the looming tariff deadline, the industrial sector remains caught in the crosshairs of a shifting trade landscape. With Trump’s policies continuing to disrupt established supply chains, the resilience of manufacturing hubs across Europe and Asia faces an increasingly uncertain test in the months ahead.