Global manufacturing slumps across Europe and Asia amid weak demand and tariff uncertainty

Manufacturing activity in major European and Asian economies weakened in November, as subdued demand, rising tariff risks, and persistent economic uncertainty dragged down factory output, according to fresh business surveys.

Manufacturing sectors in the euro zone, China, and Japan all slipped back into contraction territory, highlighting the broad challenges confronting global industry. The latest purchasing managers' indexes (PMIs) showed falling new orders, declining output, and job cuts across several major economies, although Britain and parts of Southeast Asia offered rare bright spots.

Europe: Euro Zone Returns to Contraction, Germany Struggles

Euro zone factory activity deteriorated after briefly stabilizing, with the region’s PMI signalling renewed contraction. Germany—the bloc’s industrial engine—recorded its sharpest fall in new orders in ten months, forcing companies to reduce headcount at the fastest pace since April.

Economists attribute the downturn to a mix of rising tariffs, intensified competition from China, and growing economic uncertainty. Weak demand also prevented firms from passing higher input costs onto customers, applying further pressure to margins.

France’s manufacturing sector contracted more severely, with demand for goods continuing a decline that has stretched over three and a half years. Italy, however, offered a rare positive signal, returning to slight growth and providing some relief for its fragile economy.

China and Japan: Output Weakens, Inventories Remain High

China’s manufacturing activity slipped into slight contraction, according to a private-sector PMI, following the government’s report of an eighth consecutive month of decline. High inventories, sluggish port throughput, and deflationary price pressures continue to weigh on the world’s largest manufacturing hub.

Japan’s PMI also showed continued weakness, with new orders declining for two and a half years. Manufacturers across Asia remain wary despite recent U.S. trade negotiations easing tensions with some partners.

United Kingdom: First Growth in Over a Year

The UK manufacturing sector posted its first expansion since September 2024, supported by improving domestic demand and a slower decline in overseas orders. The data offers a rare European counterpoint to the broader downward trend.

Asia: Mixed Results as Tariffs Reshape Trade Flows

Across Asia’s major exporting economies, sluggish global demand continued to dampen activity. South Korea’s factory sector contracted for a second month, although exports unexpectedly surged—driven by record semiconductor sales and strong auto shipments following a U.S. trade deal.

Taiwan’s manufacturing downturn eased slightly, while emerging markets performed far better. Indonesia and Vietnam reported robust growth, and Malaysia returned to expansion.

Outlook: Industry Faces a Challenging Winter

Despite pockets of resilience, global manufacturing remains under pressure from tariff changes, geopolitical uncertainty, and weak demand in key markets. Until inventory levels normalize and trade conditions stabilize, economists expect limited improvement heading into early 2026.