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Factory activity shrinks as US tariffs bite
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Factories across Asia-Pacific countries have been hit by a drop in activity last month, as Donald Trump’s trade wars hit demand.
Surveys of purchasing managers from across the region, which are being released today, show that manufacturing output declined during August.
In Japan, new export business contracted at the sharpest rate since March 2024, according to the latest survey from data provider S&P Global. with factory activity shrinking again.
The S&P Global Japan Manufacturing Purchasing Managers’ Index rose to 49.7 in August, up from 48.9 in July, but still below the 50-point mark separating expansion from contraction.
Annabel Fiddes, economics associate director at S&P Global Market Intelligence said:
The latest PMI data signalled that manufacturing conditions in Japan moved closer to stabilisation in August, helped by a softer fall in output.
Demand conditions remained sluggish, however, with overall new work continuing to fall modestly. Of particular concern was a steeper drop in new export business, which fell at the sharpest pace in nearly a year and-a-half.
In early August, Donald Trump latest swathe of country-specific tariffs came into effect, with Japan’s products now attracting a 15% levy.
In South Korea, manufacturers have reported ‘sustained and solid reductions in output and new orders’ last month, which they blamed on a subdued domestic economy and global trade uncertainty.
The S&P Global South Korea Manufacturing Purchasing Managers’ Index came in at 48.3 in August, up slightly from 48.0 in July, but showing the seventh successive month of worsening business conditions.
Manufacturing conditions also continue to weaken in Taiwan, where goods producers reported sharp reductions in both output and new orders.
Taiwanese manufacturers reported that customer demand had fallen both at home and overseas, and that uncertainty over US tariffs and the wider global economic climate also dampened confidence regarding the year-ahead.
S&P Global’s Annabel Fiddes reports:
“The latest PMI data indicated that the performance of Taiwan’s manufacturing sector continued to be dampened by weak global demand conditions amid lingering uncertainty over US tariffs.
Although firms signalled softer falls in output and new orders compared to July, rates of contraction remained historically marked overall, with businesses often noting that uncertainty over future US trade policy had led to greater hesitation among clients to commit to new projects.
China, which is locked in negotiations over a trade deal with the US, also continued to suffer from tariff uncertainty.
China’s manufacturing activity shrank for a fifth straight month in August, an official survey showed on Sunday, with its factory PMI rising to 49.4 from 49.3 in July.
The future of global trade was plunged into further uncertainty last week when the US court of appeals ruled that Donald Trump’s tariffs were unconstitutional, as the US president was not legally allowed to declare national emergencies and impose import taxes on other countries.
The agenda
-
7am BST: Nationwide’s UK house price index for August
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9am BST: Eurozone manufacturing PMI report for August
-
9.30am BST: Bank of England’s mortgage approvals and consumer credit data
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9.30am BST: UK manufacturing PMI report for August
-
10am BST: eurozone unemployment report
Key events
Nationwide: Housing affordability could improve
Nationwide also expects income growth to continues to outpace house price growth.
That would mean that housing affordability should continue to improve, if gradually.
Their chief economist, Robert Gardner, says further cuts to UK interest could also help:
Borrowing costs are likely to moderate a little further if Bank Rate is lowered again in the coming quarters.
This should support buyer demand, especially since household balance sheets are strong and labour market conditions are expected to remain solid.
UK house prices dipped unexpectedly in August
We also start the new month with news that UK house prices fell last month.
Lender Nationwide reports that the average UK house price dipped by 0.1% in August, surprising economists who had forecast a 0.2% rise.
The average price of a property sold in the month dropped to £271,079, down from £272,664 in July.
On an annual basis, house price inflation slowed to 2.1%, from 2.4% the previous month.
In July, prices had jumped by 0.5% as the market recovered from a dip in June after the end of a tax break on stamp duty. In August, though, the market softened again.
Robert Gardner, Nationwide’s chief economist, says that high mortgage costs are weighing on the market:
“The relatively subdued pace of house price growth is perhaps understandable, given that affordability remains stretched relative to long-term norms. House prices are still high compared to household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost of living pressures in recent years.
“Combined with the fact that mortgage costs are more than three times the levels prevailing in the wake of the pandemic, this means that the cost of servicing a mortgage is also a barrier for many. Indeed, an average earner buying the typical first-time buyer property with a 20% deposit faces a monthly mortgage payment equivalent to around 35% of their take-home pay, well above the long run average of 30%.
Factory activity shrinks as US tariffs bite
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Factories across Asia-Pacific countries have been hit by a drop in activity last month, as Donald Trump’s trade wars hit demand.
Surveys of purchasing managers from across the region, which are being released today, show that manufacturing output declined during August.
In Japan, new export business contracted at the sharpest rate since March 2024, according to the latest survey from data provider S&P Global. with factory activity shrinking again.
The S&P Global Japan Manufacturing Purchasing Managers’ Index rose to 49.7 in August, up from 48.9 in July, but still below the 50-point mark separating expansion from contraction.
Annabel Fiddes, economics associate director at S&P Global Market Intelligence said:
The latest PMI data signalled that manufacturing conditions in Japan moved closer to stabilisation in August, helped by a softer fall in output.
Demand conditions remained sluggish, however, with overall new work continuing to fall modestly. Of particular concern was a steeper drop in new export business, which fell at the sharpest pace in nearly a year and-a-half.
In early August, Donald Trump latest swathe of country-specific tariffs came into effect, with Japan’s products now attracting a 15% levy.
In South Korea, manufacturers have reported ‘sustained and solid reductions in output and new orders’ last month, which they blamed on a subdued domestic economy and global trade uncertainty.
The S&P Global South Korea Manufacturing Purchasing Managers’ Index came in at 48.3 in August, up slightly from 48.0 in July, but showing the seventh successive month of worsening business conditions.
Manufacturing conditions also continue to weaken in Taiwan, where goods producers reported sharp reductions in both output and new orders.
Taiwanese manufacturers reported that customer demand had fallen both at home and overseas, and that uncertainty over US tariffs and the wider global economic climate also dampened confidence regarding the year-ahead.
S&P Global’s Annabel Fiddes reports:
“The latest PMI data indicated that the performance of Taiwan’s manufacturing sector continued to be dampened by weak global demand conditions amid lingering uncertainty over US tariffs.
Although firms signalled softer falls in output and new orders compared to July, rates of contraction remained historically marked overall, with businesses often noting that uncertainty over future US trade policy had led to greater hesitation among clients to commit to new projects.
China, which is locked in negotiations over a trade deal with the US, also continued to suffer from tariff uncertainty.
China’s manufacturing activity shrank for a fifth straight month in August, an official survey showed on Sunday, with its factory PMI rising to 49.4 from 49.3 in July.
The future of global trade was plunged into further uncertainty last week when the US court of appeals ruled that Donald Trump’s tariffs were unconstitutional, as the US president was not legally allowed to declare national emergencies and impose import taxes on other countries.
The agenda
-
7am BST: Nationwide’s UK house price index for August
-
9am BST: Eurozone manufacturing PMI report for August
-
9.30am BST: Bank of England’s mortgage approvals and consumer credit data
-
9.30am BST: UK manufacturing PMI report for August
-
10am BST: eurozone unemployment report
