Global Manufacturing Sectors Face Contractions Amid Trade Uncertainties

In November 2025, manufacturing sectors across major economies in Europe and Asia experienced significant contractions, driven by faltering domestic demand and ongoing trade tariff uncertainties, signaling potential challenges for global economic recovery.

The latest data reveals a widespread decline in manufacturing activity, with the eurozone, China, and Japan reporting contractions in factory output. Notably, Germany faced its steepest drop in new orders in ten months, leading to substantial job cuts. Conversely, the United Kingdom's manufacturing sector showed signs of recovery, marking its first growth since September 2024, fueled by stronger local demand and improved export conditions.

Eurozone Manufacturing Activity

The eurozone's manufacturing sector contracted in November, reversing a brief period of stagnation. The HCOB Eurozone Manufacturing Purchasing Managers' Index (PMI) declined to 49.6 from October's neutral 50.0, marking a five-month low. This downturn was accompanied by the fastest pace of job cuts in seven months, as firms responded to falling demand by reducing employment and depleting inventories at the steepest rate since July 2021. Germany and France, the region's largest economies, faced deeper manufacturing recessions, with PMI readings at nine-month lows of 48.2 and 47.8, respectively. Conversely, six other countries, including Ireland (52.8) and Greece (52.7), experienced growth. Despite these challenges, business confidence improved across the eurozone, particularly in Germany and France, indicating potential recovery in 2026.

United Kingdom Manufacturing Activity

In contrast to the eurozone, the UK's manufacturing sector showed signs of recovery. The S&P Global Purchasing Managers' Index (PMI) rose to 50.2 in November from 49.7 in October, signaling the first growth since September 2024. This expansion was driven by improved domestic demand and a reduced pace of contraction in export orders. However, the overall growth remained weak, with only the investment goods sector showing an increase in production. Despite ongoing job losses, the rate of reduction was the smallest in a year. Business optimism reached a nine-month high, with manufacturers hopeful that advancements in artificial intelligence and data centers may boost competitiveness and stimulate demand.

China's Manufacturing Activity

China's manufacturing sector experienced a slight decline in November. The private-sector RatingDog China General Manufacturing Purchasing Managers' Index (PMI) fell to 49.9 from 50.6 in October, indicating a contraction. This downturn was attributed to halted production growth and a slowdown in new orders, despite an uptick in export orders following an October trade truce between China and the U.S. Competitive pressures led to a marginal drop in export charges. The survey highlighted weaknesses in domestic demand, resulting in job cuts, reduced purchasing activity, and a sharp decline in inventories. Input costs rose due to higher metal prices, but firms chose to absorb these rather than pass them on to customers, offering discounts instead. Despite current challenges, manufacturers remain optimistic about the next 12 months, hoping for supportive policies and new product launches to drive growth.

India's Manufacturing Activity

India's manufacturing growth slowed to a nine-month low in November, with the HSBC India Manufacturing Purchasing Managers' Index (PMI) falling to 56.6 from October's 59.2. This decline was largely due to U.S.-imposed tariffs, which hurt international demand and led to the weakest expansion in new export orders in over a year. The tariffs particularly impacted exports to the U.S., India's largest trading partner, contributing to a record-high trade deficit and a 9% year-on-year drop in U.S.-bound exports. Despite the downturn, the PMI remained above the 50.0 mark for the 53rd consecutive month, indicating continued expansion. However, factory output and new orders grew at their slowest pace since February, while job creation hit a 21-month low and business confidence declined to levels not seen since mid-2022. On a positive note, input cost inflation eased, allowing manufacturers to restrain price hikes.

South Africa's Manufacturing Sentiment

South Africa's manufacturing sector experienced its sharpest decline in sentiment for 2025 in November. The seasonally-adjusted Purchasing Managers' Index (PMI) dropped significantly to 42.0 from 49.2 in October, signaling a marked contraction in sector activity. This decline reflects the ongoing vulnerability of the manufacturing industry, driven by weak demand and falling production, despite minor gains in employment and a reduction in cost pressures. Export sales have remained sluggish since late 2024, while domestic demand weakened following a short-lived rebound in Q3. Nevertheless, there was a slight improvement in future expectations, with the sub-index for business conditions in the next six months rising to 50.8, suggesting cautious optimism.

Social and Economic Implications

The widespread contraction in manufacturing activity has several social and economic implications:

• Employment: The decline in manufacturing output has led to job cuts, particularly in the eurozone and China, affecting livelihoods and potentially increasing unemployment rates.

• Economic Growth: Manufacturing is a significant contributor to GDP in many economies. A sustained downturn could hinder overall economic growth and recovery efforts.

• Trade Relations: Persistent trade tensions and tariff uncertainties continue to disrupt global supply chains and trade dynamics, affecting international relations and economic stability.

• Business Confidence: While some regions show signs of optimism, the overall decline in manufacturing activity may dampen business confidence, leading to reduced investments and innovation.

In summary, the global manufacturing sector faced significant challenges in November 2025, with contractions observed across major economies due to weakened domestic demand and ongoing trade tensions. While certain regions, such as the United Kingdom, exhibited signs of recovery, the overall outlook remains cautious. Addressing these challenges will require coordinated policy measures and strategic initiatives to stimulate demand, stabilize trade relations, and support the manufacturing industry's resilience.