Global manufacturing has stalled

Photo by Mark Thompson/Getty Images

Activity levels across factories the world over stalled last month, according to the latest JP Morgan-Markit global manufacturing purchasing managers’ index (PMI) released on Wedneasday.

The PMI came in at 50.0, down from 50.1 in April, continuing the underwhelming start to the year for the global manufacturing sector.

Like PMI readings for individual nations, the survey measures changes in activity levels from one month to the next, with a reading of 50 signalling that activity levels neither expanded nor contracted during any given month.

It takes in responses from over 10,000 firms from 30 individual nations, providing the closest thing to a comprehensive report card for the global manufacturing sector as one can get.

And based on the tepid reading for May, the news on that front is not good.

Markit notes that levels of expansion slowed in the Eurozone and US, the latter at the slowest pace since October 2009, while activity levels in Asia and South America continued to contract.

“The two largest Asian manufacturing economies – China and Japan – both contracted in May. PMI readings indicated that rates of decline were the sharpest since February 2016 and January 2013 respectively,” said Markit.

“The Brazil PMI sank to its weakest level in over seven years, placing it at the bottom of the global rankings.”

Like the headline index, the survey’s individual components were weak with readings on output and news orders, although continuing to expand, edging lower during May.

New exports, a gauge on global demand, contracted at a faster pace, slipping to 48.9 from 49.2, the lowest level seen in three years.

There was some slightly better news on employment with staff numbers being shed at a slightly slower pace than what was seen in April.

Input and output prices also continued to increase, offering some hope that disinflationary forces may be easing, at least in the industrial sector.

The table below, supplied by Markit, has all the details.

David Hensley, director of global economic coordination at JP Morgan, suggests that the global manufacturing sector remains in “a low gear”.

“Indices for output, new orders and the headline PMI were all at, or barely above, the stagnation mark. The move up in the finished goods inventory index suggests manufacturers are still working to realign stocks with demand,” he said.

Attention will now turn to the release of the global services PMI report on Friday, particularly as this sector dominates the economic composition of many advanced economies such as the US, Japan and throughout the Eurozone.

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