What's going on?

�Purchasing Managers� Index� surveys (PMIs) from around the world flagged up dire straits for the manufacturing sector on Thursday.

What does this mean?

Factories continued to suffer in July. In China, activity contracted for the third month in a row, following the slowest economic growth in 30 years last quarter. While domestic demand picked up slightly, likely thanks to Chinese government support, US tariffs on the country�s exported goods continued to sting � and $300 billion more were threatened late Thursday. Ongoing trade tensions between Japan and South Korea didn�t do China�s factories (or theirs) any favors, either.

Manufacturing in the US grew slightly in July, but it�s still at its weakest in years. And the UK is even weaker: factory output shrank once again last month, stuck at its lowest level since 2013. With exports accounting for 30% of the UK economy, slowing global demand is partly responsible ��but so is geopolitical uncertainty…

Why should I care?

For markets: The Bank of England grins and bears it.
As expected, the �Old Lady� held UK interest rates steady on Thursday, in contrast to its US counterpart. It�s still working on the basis that the country will strike an exit deal with the European Union � and that it�ll therefore need to raise rates later this year to keep economic growth from getting too carried away. Investors, however, think a no-deal Brexit looks increasingly likely, and they�re betting the Bank will have to cut rates in 2019. Even if it does, the Bank reckons the UK economy will only grow 1.3% this year and next � less than it thought in May.

The bigger picture: Companies are pulling out of China.
China�s manufacturing sector is suffering from an exodus of foreign firms seeking to avoid those profit-gobbling US tariffs. Over 50, from Apple to Nintendo, have shifted or are planning to shift production overseas � and even Chinese firms are now looking to up sticks and set up factories in Southeast Asia.