Middle East Conflict Squeezes Global Manufacturing Output

China’s manufacturing sector reported its slowest growth in new orders since January, reflecting the broader strain on the world’s second-largest economy. While the euro zone’s manufacturing PMI rose to 51.9 in July, the uptick was largely sustained by clearing existing backlogs rather than genuine market expansion. Carsten Brzeski of ING noted that while the region shows unexpected resilience, the outlook remains tethered to a low-growth trajectory, further complicated by an inflation rate that hit 2.9% last month.

European Central Bank officials face mounting pressure to implement another interest rate hike to curb inflation, a move that threatens to further dampen household consumption. The impact is unevenly distributed: Germany experienced a strong start to the third quarter, yet analysts warn this is unlikely to persist without a resolution to the regional conflict. Conversely, French activity slipped into contraction, and Britain’s growth slowed to a four-month low. India’s sector also hit a five-year low, though Japan provided a rare outlier, recording its fastest output growth in over 12 years, driven primarily by a surge in demand for artificial intelligence components.