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Global manufacturing index nears 7-year low as downturn extends into 3rd month

Global manufacturing contracted for a third consecutive month in July and the downturn spread to more countries, with an index measuring business conditions in the sector approaching a seven-year low as trade tensions continued to hurt production and new orders.

The seasonally adjusted J.P.Morgan Global Manufacturing Purchasing Managers' Index reached its lowest level since October 2012, edging down to 49.3 from 49.4 in June. An index reading below 50.0 indicates a contraction in business conditions.

Nineteen of the 30 countries covered by the index, which is also produced by IHS Markit, recorded a contraction, the highest number since August 2012 and up from 18 in June. These included China, Japan, the U.K., Germany, France and Italy. The eurozone as a whole recorded the steepest downturn.

The U.S. and Canadian manufacturing sectors were among those remaining in expansion, though they were barely above the neutral 50.0 mark. The manufacturing index for the U.S. fell to its lowest level since 2009.

Global factory production dropped for the second straight month as new orders fell for the fourth time in five months. These declines came as global exports slumped for the 11th straight month and to the greatest extent since October 2012.

"Topping the list of manufacturers' reasons for lost orders and reduced output was trade war tensions, notably between the U.S. and China, followed by geopolitical uncertainty which is often itself linked to trade wars," said IHS Markit chief business economist Chris Williamson.

Williamson said more countries were suffering a drop in exports, with Germany leading the decrease. However, some Asian economies such as Vietnam were benefiting from the trade diversion arising from the U.S.-China dispute.

The global manufacturing downturn remained focused on industries producing intermediate and investment goods, while consumer goods industries continued to record an expansion.

Job losses among manufacturing firms worldwide accelerated to a seven-year high amid a sustained decline in backlogs of work.