Global manufacturing just turned in its strongest quarter in nearly six years

Photo by Feng Li/Getty Images

The global manufacturing sector continues to chug along nicely, continuing to build upon the recovery seen in the second half of last year.

The latest JP Morgan-IHS Markit global manufacturing Purchasing Managers Index (PMI) held steady at 53.0 in March, remaining at the highest level seen in 69-months.

The PMI measures changes in activity levels across the global manufacturing sector from one month to the next, ranging from a score of 0 to 100. A reading of 50 is deemed neutral, meaning that activity levels were unchanged from a month earlier. Anything above this level indicates that activity levels improved, while anything below suggests they deteriorated. The distance away from 50 indicates how quickly activity levels improved or deteriorated.

That means that at 53.0 in March, while the pace of improvement was unchanged from February, it still continued to improve nonetheless.

Source: IHS Markit

Activity levels have now improved for 13 consecutive months, with the average for the March quarter — 52.9 — the highest since the June quarter of 2011.

It also takes in over 12,000 responses from over 40 major manufacturing nations, accounting for around 95% of total manufacturing output. That means it’s as close to a real-time snapshot of perceived conditions across the sector as one can get.

“The expansion remained broad-based by product type, with PMI readings for the consumer, intermediate and investment goods sectors all signalling further solid growth,” said IHS Markit.

And that was helped by strengthening conditions in Europe, the group said, with the eurozone PMI expanding at the fastest pace in nearly six years.

That helped to offset solid, albeit slower growth, in the US, Japan, UK, Russia and China, and continued contractions in South Korea and Brazil.

As seen in the table below from IHS Markit, like the headline PMI, most activity subindices were largely unchanged from a month earlier.

Source: IHS Markit

Perhaps of most importance, the measure on new orders — a lead indicator on future activity levels — remained firmly in expansionary territory.

That’s a good sign for overall activity levels moving forward.

“This extended the trend of concurrent growth that has been ongoing since the final quarter of 2012,” said IHS Markit.

“The increase in new business exerted pressure on capacity, leading to the steepest accumulation of backlogs of incomplete work for over three years.”

Later in the week, IHS Markit will release its global services PMI for March which will feed into the global composite PMI, a report that tracks activity levels across the broader global corporate sector.

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