Factories across the globe faced a tough September, as new data revealed that manufacturing activity shrank in most major economies, with the persistent drag of weak demand in both China and the United States taking a notable toll. According to surveys published by Reuters and S&P Global, this downturn was not isolated to a single region—rather, it was a worldwide phenomenon, with ripple effects felt from Europe to Asia and beyond.
The Euro zone, a critical engine of global manufacturing, slipped back into contraction territory after a brief glimmer of growth in August. The HCOB Eurozone Manufacturing Purchasing Managers' Index (PMI), a closely watched indicator compiled by S&P Global, fell to 49.8 in September from 50.7 the previous month. Since any reading below 50.0 signals contraction, this marked a return to negative territory for the first time since mid-2022. The data showed new orders in the Euro zone dropping at their fastest rate in six months, with export markets proving to be a particular drag on overall performance.
"The drop in the PMI is showing up across the board, with respective figures for consumer goods, capital goods and intermediate goods all down on the month," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, as quoted by Reuters. This broad-based decline highlighted the fragility of the region's industrial recovery and left policymakers scrambling for solutions.
Within the Euro zone, the picture was far from uniform. The Netherlands stood out as a rare bright spot, with factory activity hitting a 38-month high in September. Growth continued, albeit more modestly, in Greece, Ireland, and Spain. Meanwhile, the bloc's three largest economies—Germany, France, and Italy—all registered contractions, underscoring the uneven nature of the recovery and the particular challenges faced by Europe's industrial heavyweights.
Britain, now outside the European Union, fared no better. Manufacturing activity there shrank at the fastest pace in five months, a sign of subdued domestic demand and fewer export orders. This painted a more pessimistic picture than recent official data had suggested, raising concerns about the resilience of the UK’s manufacturing sector as it faces persistent economic headwinds.
Asia, a region deeply entwined with global supply chains and heavily reliant on exports, was not immune to the downturn. Japan, a traditional export powerhouse, saw its manufacturing PMI fall to 48.5 in September from 49.7 in August, marking the fastest pace of contraction in six months. The survey, reported by Reuters, attributed this decline to steep falls in both output and new orders. Taiwan, renowned for its advanced technology sector, also experienced a sharp drop, with its PMI slipping to 46.8 last month.
The malaise extended to the Philippines and Malaysia, where manufacturing activity also shrank in September. The stress on Asian manufacturers highlighted the challenge policymakers face in shielding their economies from higher U.S. levies—an ongoing legacy of trade policies introduced under President Donald Trump. These tariffs have upended established global trade relationships and put the brakes on economic growth in several export-dependent nations.
China, the world’s second-largest economy and a key driver of global demand, remained mired in a prolonged slump. An official survey released at the start of the week showed manufacturing activity contracting for a sixth consecutive month in September. The root causes? Weak domestic consumption and the ongoing squeeze from U.S. tariffs. As Reuters noted, this downturn reflects the twin pressures facing China: a lack of durable recovery in consumer demand since the pandemic and the persistent impact of trade barriers erected by Washington.
"The September PMI readings for most countries in Asia remained weak and we continue to expect manufacturing activity in the region to struggle in the near term," said Shivaan Tandon, an emerging markets economist at Capital Economics. He added, "With growth set to soften and inflation likely to remain contained, we expect central banks in Asia to loosen policy further." This outlook suggests that policymakers may soon be forced to cut interest rates or introduce other stimulus measures to shore up their economies.
There were, however, a few glimmers of hope in an otherwise bleak landscape. South Korea, Asia’s fourth-largest economy, bucked the trend with its factory activity expanding for the first time in eight months. The S&P Global manufacturing PMI for South Korea rose to 50.7 in September, moving above the 50-mark for the first time since January 2025. This uptick was underpinned by improving overseas demand, though the outlook for Korean exporters remains uncertain. As Reuters reported, the country’s export prospects hinge on ongoing negotiations to formalize a July deal aimed at reducing U.S. tariffs on Korean goods imports, including automobiles, from 25% to 15% in exchange for a $350 billion investment in the United States. Those talks, however, have stalled due to Seoul’s concerns over foreign exchange implications.
Elsewhere in Asia, India’s manufacturing sector expansion lost momentum, slipping to its weakest pace in four months. Analysts pointed to Washington’s punitive 50% tariffs on Indian goods as a possible factor behind the slowdown in Asia’s third-largest economy. The situation in India serves as yet another example of how U.S. trade policy is reverberating across global markets, affecting not just direct trading partners but also the broader network of economies that depend on robust international demand.
Back in Europe, the divergent performance among member states has sparked debate over the best path forward. Some economists argue that more targeted fiscal stimulus is needed to support struggling sectors, while others caution against overreacting to what could be a temporary dip. The fact remains, however, that the contraction in Germany, France, and Italy—three of the Euro zone’s industrial giants—raises red flags about the region’s ability to weather ongoing global shocks.
Britain’s manufacturing woes, meanwhile, have reignited discussions about the country’s post-Brexit economic trajectory. With domestic demand subdued and export orders dwindling, manufacturers are calling for more government support and greater clarity on future trade arrangements with both the European Union and the United States.
Looking ahead, the consensus among economists and policymakers is that the global manufacturing sector faces a period of uncertainty, with the specter of trade tensions, weak demand, and shifting economic alliances clouding the outlook. Whether recent contractions signal the start of a more prolonged downturn or simply a temporary setback remains to be seen. For now, factories from Tokyo to London are bracing for what could be a challenging end to 2025.
Even in a world accustomed to economic ups and downs, the breadth and depth of September’s manufacturing slowdown is a stark reminder of how interconnected—and fragile—the global economy has become. Policymakers, business leaders, and workers alike will be watching closely to see whether this slump marks the beginning of a new chapter or simply a pause before the next rebound.
