Economy
Global manufacturing holds up, weathering war-driven cost pressures
Eurozone factory output posted its best quarterly performance since the start of 2022 last month, while Asian manufacturers were lifted by an AI boom, according to business surveys on Wednesday that provide some respite from the U.S.-Israeli war with Iran.
Cost pressures did dip, but they remain elevated as supply shortages and shipping delays lengthened lead times, suggesting the energy shock tied to the Middle East conflict could intensify.
S&P Global noted that most survey responses were collected before the signing of a memorandum of understanding for a ceasefire between the U.S. and Iran on June 17, meaning the full impact on supply chains and energy costs is not yet captured in the PMI data.
Inflation in the common currency area was less than expected last month, coming in at 2.8%, but still well above the European Central Bank’s (ECB) 2.0% target, official data showed.
“The inflation rate in the eurozone fell noticeably in June,” said Ralph Solveen at Commerzbank. “A key reason is that oil prices fell significantly over the past month due to the partial reopening of the Strait of Hormuz.”
On June 11, the ECB raised interest rates as a war-related energy cost surge had pushed inflation over 3%, well in excess of its 2% target.
The S&P Global Eurozone Manufacturing PMI slipped to a four-month low of 51.4 in June from May’s 51.6 but remained above the 50.0 threshold separating growth from contraction for a fifth month. The reading was just above a preliminary estimate of 51.3.
German factory activity expanded modestly while France’s grew slightly faster than initially forecast. In Britain, manufacturing cooled despite a boost to output from stockpiling ahead of price hikes.
Artificial support
For now, surveys underscore how the global AI investment wave is reshaping Asia’s economic fortunes. Booming demand for chips, data-center equipment and other technology goods provides a powerful engine for growth and acts as a critical buffer against mounting geopolitical and trade risks.
China, Japan and South Korea saw factory activity expand in June on solid demand for chips, computers and other AI-related products, as well as stockpiling by firms seeking to guard against shortages and price rises from the Middle East conflict.
RatingDog General Manufacturing China PMI hit 51.7 in June, expanding for a seventh straight month. It eased from May’s 51.8 but exceeded analysts’ forecast of 51.6. The finding aligned with an official survey on Tuesday showing factory activity returned to expansion last month on robust export orders.
Japan’s PMI rose to 54.8 from 54.5, expanding for a sixth consecutive month with new orders growing at their fastest pace in more than two years. But input cost inflation stayed at a nearly four-year high, a sign of mounting price pressures that could crimp corporate margins and lead to broad-based inflation.
South Korea’s factory activity expanded for a seventh consecutive month although at a slower pace on falling export demand.
“Firms frequently reported that rising raw material prices, alongside difficulties sourcing and receiving inputs due to delays and shortages, weighed on sector performance,” said Usamah Bhatti, economist at S&P Global Market Intelligence.
Factory activity in most Asian emerging economies continued to expand. The Philippines held steady at 50.9 from 50.8, and Malaysia rose to 50.7 from 49.9, surveys showed.
Taiwan and Vietnam also saw factory activity expand. A separate survey showed India’s manufacturing sector expanded at its second-slowest pace in four years as export orders suffered from softer demand in Europe.
One of the longest suspension bridges in the world has generated a combined TL 211 billion (over $4.5 billion) in fuel and time savings for Türkiye since it was launched a decade ago, a senior official said Wednesday.
Osmangazi Bridge, spanning the Gulf of Izmit at its narrowest point, was opened to traffic on July 1, 2026, to become the centerpiece of the 426-kilometer Istanbul-Izmir Highway.
It significantly cuts down travel time between Istanbul and the western provinces by bypassing the long drive around the gulf or the need to wait for car ferries.
Stretching more than 2.6 kilometers (about 1.6 miles) in total, it lowered travel times across the gulf from up to 1.5 hours by road or 45-60 minutes by ferry to just six minutes.
“The bridge has delivered approximately TL 40 billion in fuel savings and TL 171 billion in time savings over the past 10 years, bringing the total economic benefit to TL 211 billion,” Transport and Infrastructure Minister Abdulkadir Uraloğlu said.
Uraloğlu added that the shorter crossing has also reduced carbon emissions by 2 million tons over the same period.
Marking the bridge’s 10th anniversary, the minister said its construction was completed in 39 months.
Uraloğlu highlighted several engineering milestones achieved during construction, saying the bridge contains 109,490 tons of steel, equivalent to roughly 73,000 automobiles.
The steel cables used in the suspension system would stretch 84,518 kilometers if laid end to end, enough to circle the Earth more than twice.
The bridge’s main deck covers 96,364 square meters, an area comparable to about 14 football pitches, he said.
The minister also said the project set world records during construction.
A 22,500-ton steel deck section was installed using the incremental launching method, which he described as the world’s largest operation of its kind for a steel viaduct.
Two additional deck sections weighing 2,300 tons and 2,600 tons were installed using heavy-lift techniques, also setting global records for steel viaduct construction, he added.
Türkiye’s central bank on Wednesday simplified its reserve requirement framework by abolishing the additional lira reserve requirement previously applied to foreign currency deposits/participation funds.
The Central Bank of the Republic of Türkiye (CBRT) also said it was raising reserve ratios for foreign currency liabilities.
In a statement, the bank said the move sought to “strengthen macrofinancial stability and support the monetary transmission mechanism.”
Under the decision, the requirement introduced in 2023 obliging banks to hold additional Turkish lira-denominated reserve requirements against foreign currency deposits and participation funds has been terminated. The additional reserve ratio had most recently been set at 2.5%.
At the same time, the CBRT increased reserve requirement ratios for foreign currency deposits.
It said the reserve requirement ratios applied to foreign currency deposits/participation funds had been revised to 32% from 30% for demand deposits and deposits with maturities up to one month, and to 28% from 26% for those with longer maturities.
Foreign currency
deposits/participation funds
Previous ratio New ratio Demand deposits and deposits with
maturities up to 1 month
30% 32% With longer maturities 26% 28%
Inflation in Istanbul eased slightly on both an annual and a monthly basis in June, data from a major chamber showed on Wednesday, ahead of the release of nationwide data later this week.
Consumer prices in Türkiye’s largest city advanced 35.94% year-over-year last month, the Istanbul Chamber of Commerce (ITO) said, thus slowing down from 36.77% registered in May.
Month-over-month prices rose 1.14%, ITO said. This marked a lower increase than 1.53% seen in May.
Driving the monthly surge in prices was the communication group, with a surge of 4.28%, and the alcohol and tobacco group with 4.20%, the survey showed. The prices, however, regressed in transportation (-0.95%) and the clothing and footwear group (-2.21%).
On a yearly basis, education and housing continued to weigh on the overall inflation picture, being the two groups with the highest surge at 52.51% and 46.29%, respectively.
The ITO data comes prior to the official nationwide data due to be released by the Turkish Statistical Institute (TurkStat) on Friday.
Inflation in the country picked up recently amid Iran-related war-related pressures, after a long downward streak that saw it drop to the 30s from over 70%.
Economists polled recently by Anadolu Agency (AA) expect Türkiye’s inflation rate to decline slightly in June.
The consumer price index (CPI) is forecast to rise 1.04% month-on-month in June, according to the average estimate of 17 economists who took part in the Finance Inflation Expectations Survey. Their monthly inflation forecasts ranged between 0.81% and 1.77%.
Consumer prices rose 1.71% month-over-month in May.
At the same time, annual inflation is expected to fall to 32.17% in June from 32.61% in May, the poll showed.
Türkiye’s manufacturing activity contracted again in June after a slight rebound in May, as the war in the Middle East disrupted demand and supply, a business survey showed on Wednesday.
The Istanbul Chamber of Industry’s (ISO) Türkiye Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 47.1 in June from 49.8 in May. The 50-mark separates growth from contraction.
Output returned to decline after rising slightly in May, with firms citing market uncertainty linked to the conflict in the Middle East, softer new orders and higher prices.
Demand weakened further, with total new orders posting a solid decline, and new export business also falling again after expanding in May.
The June survey reversed some of May’s improvement and extended the sector’s downturn to 27 consecutive months. Firms also reduced stocks of purchases and finished goods amid muted demand conditions, the panel showed.
“The Turkish manufacturing sector took a step back in June, posting a renewed softening of production amid muted new orders. Anecdotal evidence from the survey indicated that the war in the Middle East continued to be the principal cause of the challenges facing firms,” said Andrew Harker, economics director at S&P Global Market Intelligence.
U.S. retailers are speeding up their orders from China, moving up orders by four to six weeks to secure inventories for Black Friday and Christmas holiday sales before expected tariff hikes later this year, shipping executives said.
U.S. President Donald Trump’s visit to China last month has preserved the detente between the world’s two largest powers, but uncertainty remains high.
A universal 10% U.S. tariff imposed by Washington in February, after the Supreme Court declared some earlier tariffs illegal, expires on July 24, but it is widely expected to be replaced with higher levies.
The U.S. Trade Representative has proposed a 12.5% tariff on imports from China and elsewhere following an investigation into forced labor, which Beijing denies, with a final decision expected in the coming months.
“There is an expectation that tariffs could be raised again, or restored to previous levels, so everyone is rushing to get goods in before that happens,” said Tony Meng, a China-based senior sales manager at shipping firm XPD Global.
U.S. exports expected strong in June
Usually, such orders peak in July through September, but shipping firms said volumes in May and June were higher than expected, contributing to a spike in shipping prices.
The frontloading means that the 35% growth in U.S. imports from China in May, which overshadowed April’s 11% growth and March’s contraction, could be sustained in June but may fade later in the summer.
Exports have been a key growth driver this year for China, compensating for structural weakness in domestic demand and building on a strong 2025 when the world’s second-largest economy posted a record $1.2 trillion trade surplus.
China’s top U.S. export items by value in May included smartphones, lithium-ion batteries, solid-state drives, toys, kitchenware and festival products. June data will be released on July 14.
Shipping group Maersk said in a statement to Reuters that container space has been tightening on the China-U.S. route since mid-May, due to “stronger customer demand and earlier seasonal bookings.”
A China-based shipping executive, who requested anonymity because he was not authorized to speak to the media, said back-to-school items such as stationery and apparel were part of the May-June frontloading, while early Christmas stockpiling also played a role.
He added May’s rise was also due to soccer World Cup-related orders, including jerseys, flags, souvenirs and large-screen TVs. The U.S. co-hosts the tournament with Canada and Mexico.
Shipping costs rise
Maritime consultancy Drewry’s World Container Index showed spot shipping rates from Shanghai to New York on June 25 were $7,149 per 40-foot container, 6% higher than a week before and 25% up on the year.
On the Shanghai to Los Angeles route, the cost was $5,750, 12% up on the week and 54% higher on the year.
“Importers continue frontloading shipments ahead of potential tariff changes and higher bunker-related costs,” a Drewry report said.
Outdoor furniture maker Jin Chaofeng said it would be hard to pass the entire cost of shipping fees on to customers, pointing to thin pricing power and profit margins for Chinese manufacturers in less technologically advanced sectors.
Kyle Henderson, CEO and co-founder of container-tracking software provider Vizion, warned, however, that tariffs still weigh on overall U.S. demand , which remains below its three-year average and should only be described as “normal-to-soft.”
The higher shipping costs reflect capacity management by transport firms more than surging U.S. demand, Henderson said, citing some cancelled sailings in recent weeks.
Henderson expects volumes to drop after July and into the third quarter due to a “combination of inventory already landed and a tariff environment that structurally raises the cost of China-origin goods.”
Türkiye’s foreign trade deficit narrowed 15.6% year-over-year in May, as imports fell more sharply than exports, official data showed on Tuesday.
Exports totaled $22.46 billion (TL 1.05 trillion), down 9.5% from the same month last year, while imports dropped 10.8% to $28.07 billion, according to provisional figures from the Turkish Statistical Institute (TurkStat) and the Trade Ministry.
The foreign trade gap fell to $5.61 billion in May from a year earlier.
The export-import coverage ratio rose to 80% in May, compared with 78.9% in the same month of 2025.
Excluding energy products and non-monetary gold, exports fell 11.5% to $20.5 billion, while imports dropped 16.2% to $21.03 billion. The trade deficit excluding these items stood at $525 million, while the coverage ratio was 97.5%.
Tuesday’s figures showed energy accounted for nearly one-quarter of Türkiye’s total imports in May, rising 43.4% year-over-year to $6.11 billion.
Crude oil imports increased 1.7% year-over-year to 2.67 million tons, up from 2.62 million tons in the same month last year.
This January through May, overall exports edged up 0.2% year-over-year to $111.12 billion, while imports rose 1.1% to $153.83 billion.
The foreign trade deficit rose 3.6% in the first five months of the year to $42.72 billion. The export-import coverage ratio fell to 72.2%, from 72.9% in the same period last year.
Germany was Türkiye’s top export destination in May, with shipments totaling $1.71 billion, followed by the U.S. with $1.52 billion, the U.K. with $1.38 billion, Italy with $1.14 billion and Spain with $922 million.
Russia was the leading source of imports, with $3.76 billion, followed by China with $3.43 billion, Germany with $2.04 billion, the U.S. with $1.21 billion and Italy with $1.06 billion.
Manufacturing products accounted for 94.5% of total exports in May, while intermediate goods made up 72.7% of total imports.
The share of high-technology products in manufacturing exports was 3.1% in May, while high-tech products accounted for 11.8% of manufacturing imports.
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