Jamie Spencer
Manufacturing activity across Asia, Europe, and the U.S. concluded 2024 with sluggish performance, reflecting mounting concerns about trade tensions and economic uncertainty as the world braces for a challenging 2025. Weakness in key economies like China, Germany, and the U.S. highlights the fragile state of global manufacturing, with persistent pressures weighing on production and demand.
Asia’s Factory Activity Shows Mixed Signals
In Asia, factory activity remained weak overall, with China and South Korea reporting declines. China’s Caixin/S&P Global Manufacturing Purchasing Managers’ Index (PMI) slipped to 50.5 in December from 51.5 in November, underscoring only modest growth. Gabriel Ng, assistant economist at Capital Economics, noted that Beijing’s late-2024 policy support provided a short-term boost:
“And this improvement should carry over into early 2025, but the boost probably won’t last more than a few quarters.”
South Korea’s PMI fell further into contraction, reflecting sharper declines in output. The country’s central bank governor emphasized the need for flexible monetary policies amidst heightened uncertainties, compounded by political instability following last month’s failed martial law bid by President Yoon Suk Yeol.
Elsewhere in Asia, Taiwan and parts of Southeast Asia saw marginal improvements, while Japan, Malaysia, and Vietnam reported shrinking factory activity. India stood out, continuing its uninterrupted manufacturing expansion for three and a half years, though at its slowest pace in 2024.
Europe’s Manufacturing Sector in Recession
Europe’s factory activity remained in a deep slump, with the eurozone PMI slipping to 45.1 in December, marking another month below the 50 threshold separating growth from contraction. Claus Vistesen, Chief Eurozone Economist at Pantheon, highlighted the continued slide in new orders:
“Output in the eurozone remained under pressure at the end of 2024, held back by a continued slide in new orders in both the domestic market and in exports.”
Germany, the region’s largest economy, saw deeper declines in output and orders, while France recorded its sharpest contraction in more than four years. The UK, outside the EU, also faced sharp declines, with factory activity shrinking at the fastest pace in 11 months due to higher taxes and weak foreign demand.
U.S. Manufacturing Ends 2024 on a Sour Note
In the United States, manufacturing activity contracted for the sixth consecutive month. The S&P Global U.S. Manufacturing PMI dipped to 49.4 in December from 49.7 in November, remaining below the growth threshold.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, painted a grim picture:
“U.S. factories reported a tough end to 2024 and have scaled back their optimism for growth in the year ahead.”
Subdued sales, weak export demand, and trade uncertainty fueled by President-elect Donald Trump’s tariff pledges added to the industry’s challenges. Trump’s plans to impose higher tariffs on imports from Mexico, Canada, and China further clouded the outlook for the U.S. manufacturing sector in 2025.
Trade and Political Risks Loom
The global manufacturing slowdown is compounded by escalating trade tensions and political uncertainties. Trump’s proposed tariffs are expected to strain U.S.-China relations and impact trade-dependent economies like Germany and South Korea. Meanwhile, South Korea’s political crisis and China’s structural economic challenges further exacerbate regional instability.
Conclusion: Manufacturing Faces an Uncertain 2025
As the global manufacturing sector enters 2025, it faces a complex landscape of trade tensions, political instability, and economic uncertainty. While some regions show resilience, the overarching theme is one of cautious optimism tempered by significant risks. Whether through policy adjustments or structural reforms, a coordinated global effort will be critical to stabilizing and revitalizing manufacturing in the year ahead.
