Industry is performing worse than the broader economy globally

We expect to see shallow industrial recessions in both the US and Europe take hold later this year, followed by modest recoveries though 2024. We also expect to see an improvement in Chinese industrial activity through H2 2023 and into 2024. But the impact of past policy tightening, the reduced availability of credit, and high (though moderating) inflation are creating a subdued near-term environment for global industry.

What you will learn:

• The US economy remained on a solid footing at the beginning of Q3. Nonetheless, we anticipate an industrial recession starting in Q4 of this year.
• In China, industrial production continues to disappoint amid weak export demand, sluggish consumer spending, a sharper-than-anticipated correction in the property sector and industrial destocking. Nonetheless, advanced manufacturing and high-tech sectors, which are being targeted by support measures, ought to outperform broader industrial trends.
• Despite the near-term weakness, there are some bright spots within industry. The semiconductor downturn appears to have reached a trough. Supply chains have normalised to a large degree, which is contributing to recovering production in backlog-affected sectors.