LONDON/TOKYO: Factory output fell widely last month as slowing global demand and the impact of China’s COVID-19 lockdowns weighed, although the downturn eased in Europe and activity in India actually picked up, surveys showed on Thursday.

While the surveys indicated that factories in the euro zone still face a harsh winter it may not be as bad as initially feared and there were signs rampant inflationary pressures were abating.

Inflation may have peaked, or be close to doing so, in many economies but steep price rises and increased borrowing costs as central banks tighten policy aggressively have left indebted consumers feeling the pinch and forcing them to cut spending.

“Global consumers are reining back on spending on discretionary goods in a world of stagflation,” said Duncan Wrigley at Pantheon Macroeconomics.

S&P Global’s final manufacturing Purchasing Managers’ Index (PMI) for the euro zone rose to 47.1 from October’s 46.4, but was below a preliminary reading of 47.3 and under the 50 level that marks growth in activity.

China’s factory activity contracts as Covid disruptions spread

An index measuring output, which feeds into a composite PMI due on Monday and seen as a good guide to economic health, rose to 46.0 from 43.8, marking its sixth month of sub-50 readings.

“Today’s PMI data corroborate our view that manufacturing is headed for a winter recession but suggest the outlook for the sector is starting to improve slightly,” said Riccardo Marcelli Fabian at Oxford Economics.

“While indicators suggest that fundamentals are in better shape than in previous crises, the euro zone is bound to endure a mild, widespread recession this winter.” Economists in a recent Reuters poll gave a 78% chance of a recession within a year.

In Britain, outside the European Union, manufacturing activity fell for a fourth month in a row, as businesses faced the weakest overseas demand in two-and-a-half years, leading to job cuts and reduced confidence about the year ahead, its PMI showed.