Purchasing Managers’ Index for Manufacturing – update of June results: We did not have the full range of data available for last week’s Friday Brief so, to round up the June Purchasing Managers’ Index (PMI) data, the Global Manufacturing PMI for June, compiled by J P Morgan using the data from S&P Global, fell to a 22-month low of 52.2, with most countries having a reading above the crucial 50 level. As a result of the turnaround in China, where Covid restrictions were easing, the global output indicator returned to a growth position following the fall in May; by sub-sector, investment goods also saw an increase in output in June following two negative months.
In the Americas, the trend is generally negative with a sharp fall for the USA, a moderate reduction for Canada and virtually no change in Brazil, although all 3 counties still had a PMI reading above the crucial 50 level; the exception on this continent is Mexico which was one of only a handful of countries to see the PMI increase and, in this case, built on the first positive reading for 26 months that had been registered in May.
Finally, a reminder that the manufacturing PMI is a composite index calculated by weighting the trends for five factors – total new orders (30%), output (25%), Employment (20%), suppliers delivery times (15%) and stocks of purchases (10%). It is important to remember that the delivery times metric is inverted so longer delivery times add to the index because they are regarded – falsely during the pandemic – as a sign of increased activity rather than as a constraint.
The S&P Global PMI reports for major economies around the world are available from their web-site at https://www.pmi.spglobal.com/Public/Release/PressReleases and our summary charts report has been updated and can be downloaded below. You should note however, that the PMI readings for Hungary, Sweden and Switzerland are compiled independently and not on this site but they can be found with an appropriate internet search.
Euro-zone Investment & Profitability, 1st Quarter 2022: Data published by Eurostat shows that the business investment rate in the Euro-zone improved to 24.2% having been 23.8% in the previous quarter; this takes the rate back to the same level as in the 1st quarter of 2021.
The gross investment rate of non-financial companies is defined as gross fixed capital formation (investment) divided by gross value added and the increase happened because fixed capital formation increased more rapidly than gross value added. Investment grew by +3.1% compared to the 4th period of 2021, registering its 3rd consecutive positive quarter-on-quarter trend. However, despite this and growth in all but one of the quarters since the middle of 2020, the overall level of investment is still more than 7% lower than at the end of 2019, before the pandemic started.
The profitability rate of non-financial companies in the Euro-zone fell to 39.2%, its lowest level since the 2nd quarter of 2020. This is calculated as gross operating surplus (calculated based on compensation of employees and other taxes less subsidies on production) divided by gross value added; the fall in the ratio was because the operating surplus grew more quickly than gross value added.
You can get more information on this by downloading the euro-indicators release from the Eurostat website at https://ec.europa.eu/eurostat/news/euro-indicators (05 July – note that this is headlined “household saving rate …”) or we can send you a copy if you prefer.
UK Productivity, 1st Quarter 2022: The Office for National Statistics (ONS) has updated the productivity data for the start of the year; it now shows that although output per hour (the preferred measure of productivity) was -0.6% lower than in the previous quarter (Q4-21), it was +1.7% higher than the average through 2019 before the pandemic. These are the whole economy trends.
The quarter-on-quarter fall in productivity came because there was a larger increase in hours worked (+1.3%) than for gross value added (+0.8%).
The breakdown by sector shows that manufacturing productivity was +0.4% higher than in the previous quarter and +4.7% above the 2019 average level. This release also has data at an industry level although at a slightly more aggregated level than we normally use. The machinery industry showed quarter-on-quarter growth of +3.7% and output per hour worked was +7.7% above the 2019 average level. There is a different but equally positive trend for the basic metals & metal products group with increases of +6.1% and +3.1% respectively.
The weak point is the transport equipment category where the poor output picture for both the automotive and aerospace industries mean that output per hour worked was -0.4% lower than in Q4-21 and -20.4% below the 2019 average level.
There are more details in the ONS Statistical Bulletin and data sets which you can download from their web-site at https://www.ons.gov.uk/releasecalendar (07 July) or request from MTA (we can point you to the most relevant data tables among the 54 separate sheets!).