Cooling demand for goods threatens to turn pandemic boom into bust

Factories around the world are reporting weakening demand for their products, a sign that the consumer-goods boom that kick-started the postpandemic economic recovery could turn into a bust as surging prices and interest rates erode spending power.

Surveys of manufacturers released Friday told a similar story whether the factory was in South Korea, Italy or the U.S.: Output is falling or is rising at a slower pace, driven by declines in new orders, and particularly those from overseas buyers.

When prices began to rise rapidly early last year, central bankers thought the surge would be short-lived because supply would increase to match higher demand. As higher inflation persisted, they stopped waiting and began raising borrowing costs to reduce demand.

Now it seems higher prices themselves appear to be having the same effect, weighing on purchases even in places such as the eurozone, where interest rates have yet to rise.