Weak demand for goods has led to weakness in global manufacturing.

The Institute for Supply Management announced that the U.S. PMI in July was 46.4, although it improved from the previous month, but it has been below the 50-point line for nine consecutive months, setting the longest contraction cycle since the 2008 financial crisis. Orders for electronic equipment and chemicals continued to be weak.

The S&P Global manufacturing PMI for July has been below 50 for 11 consecutive months, second only to the post-Lehman recession. In 29 major countries and regions, 70 percent of the PMI is below 50, indicating a contraction in business activity. The situation was particularly grim in Europe, where the PMI for Germany, the region’s largest economy, was just 38.8, well below the line between expansion and contraction.

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In the second quarter of 2023, German chemical giant BASF’s main customers, other than the automotive industry, saw demand fall sharply. ‘It’s not going to happen in the second half like China did during the financial crisis [with massive fiscal stimulus],’ executive board chairman Richard Brudermuller said at an earnings conference in July. The company recently cut its full-year 2023 earnings forecast.

Japan’s manufacturing PMI came in at 49.6 in July, falling below 50 for two months in a row. An easing of the semiconductor shortage has revived car production. But Japan’s listed companies, whose performance is generally good, cannot escape the impact of falling external demand.

The service sector is now the engine of the global economy and the US economy. It leads to an increase in the size of employment, and the risk of an immediate recession is low. But if the lack of demand and weakness in manufacturing persist, can services alone support the real economy? Fears of recession have not been dispelled.