The recovery across the global manufacturing sector slowed in May, thanks largely to a tepid growth in developing nations, including China.
The JP Morgan-IHS Markit Global Manufacturing Purchasing Managers Index (PMI) — a measure on activity levels across the sector — fell to 52.6 in May, leaving it at the lowest level in six months.
The PMI measures changes in activity levels across the global manufacturing sector from one month to the next. Anything above 50 signals that activity levels are improving while a reading below suggests they’re deteriorating. The distance away from 50 indicates how quickly activity levels are expanding or contracting.
That means that while activity levels continued to improve last month, the pace of improvement was the slowest since late 2016.
IHS Markit said that the deceleration was driven by weakness in developing nations, including China.
“Developed nations again tended to outperform emerging markets in May,” the group said.
“Growth across emerging nations slowed to a pace only marginally above the stagnation mark. The developed markets PMI continued to signal solid and steady expansion.”
IHS Markit said that weakness in China and the US was partially offset by stronger readings in other major manufacturing nations during the month, led by Europe.
“Among the largest nations covered by the survey, the US PMI slipped to an eight-month low and the China PMI dipped below the critical 50.0 no-change mark for the first time in 11 months,” it said.
“The UK PMI remained close to April’s three-year high. Rates of improvement strengthened in the euro area and Japan.”
This table from IHS Markit reveals how individual activity subindices fared during the month.
While all components continued to improve, in most instances it was at a slower pace than April.
“Worldwide manufacturing production rose for the 55th successive month in May, underpinned by a solid increase in new work received,” said IHS Markit. “However, the rate of expansion in output moderated further to its weakest since last November. Growth of new business steadied at April’s five-month low.”
Importantly, while the new orders subindex has weakened recently, it still points to improved demand — a good sign given it is seen as a lead indicator on activity levels in the future.
“The underlying dynamics of the survey, such as fuller order books, rising employment and positive business sentiment, also bode well for the future performance of manufacturing,” said David Hensley, director of global economic coordination at JP Morgan.
So while activity levels aren’t improving as fast as they were earlier this year, they still remain healthy nonetheless.