Flash Purchasing Managers Index, January 2023: The flash manufacturing sector Purchasing Managers’ Index (PMI) for the UK published earlier this week showed an improvement from the December figure but at 46.7, it is still firmly in negative territory. The output element of the index was also higher than last month (and at a 6-month high) while still well below the crucial 50 mark. With the service sector seeing activity fall more rapidly than in December, the data overall suggests that the economy may well be in recession but there was at least a small bright spot with business expectations (not part of the PMI calculation) improving considerably, continuing a trend of the two previous months following the low point in October 2022.
We see a similar pattern overall for the Euro-zone with the manufacturing PMI reading of 48.8 pointing to a slower pace of decline in activity, again driven in part at least by a slower rate of decline for output (this was at a 7-month high of 49.0). However, new orders are still falling at a steep rate even though this was the “best” result since last May. Despite this weak data, employment continues to increase in the manufacturing sector and supplier delivery times were unchanged with a notable improvement in Germany but a lengthening in France (bear in mind the perverse effect this has on the overall index).
The only countries with separate “flash” reports are France and Germany and we see contrasting fortunes here; there was a marginal deterioration in Germany with the flash manufacturing PMI falling to 47.0 but France saw an improvement that took its reading above the crucial 50 level for the first time since last August. In part this was because the output element of the calculation was unchanged in Germany (48.4) but improved a little in France (48.0 from 47.7 in December); however, the lengthening of suppliers delivery times in France also contributed to the slightly positive PMI as this is taken as a sign of increased activity and so longer delivery times is a positive in the calculation.
Outside of Europe, there are flash manufacturing PMI readings for Japan and the USA. For Japan, the reading of 48.9 was unchanged from the December figure and is the joint strongest deterioration in the sector since October 2020. Both output and orders were down but at the slowest pace for three months with a further piece of good news coming from an improvement in business confidence.
The manufacturing sector in the US also continues to contract but, like the UK and Euro-zone, at a slightly slower pace than in December, with the rate of fall in output slowing. There was another sharp fall in new orders which declined at the 2nd fastest rate in 2½ years, albeit with a more modest fall in export business.
These reports are available on the “PMI by S&P Global” website at https://www.pmi.spglobal.com/Public/Release/PressReleases or on request from MTA.
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CELIMO State of Trade Report – January 2023: CELIMO, the European grouping of associations for importers and distributors, has published its State of Trade Report, effectively for the end of 2022. The highlights include:
- For most countries, the growth in GDP during 2022 was relatively strong but this was mainly because economies were still in recovery mode from the pandemic, at least in the first half of the year. Slower growth is forecast for 2023 and, in the case of Finland, Netherlands, UK, Germany and Sweden, the economy is expected to contract for the year as a whole (although not necessarily in every quarter).
- The Purchasing Managers’ Index (PMI) for manufacturing has been below 50 in each of the last 4 months of 2022, except in Switzerland and Hungary. There was a small element of positive news as, in most of the countries below 50, the December reading was better than most or all of the 3 preceding months – apart from those where the latest month was unchanged from November (Italy and Sweden), the exception here was the UK which had its lowest PMI reading since the pandemic.
- Switzerland continues to have an exceptionally low rate of inflation and in the case of France and Spain, their rates are relatively small because of the way in which these governments have provided support in the face of high energy prices. Apart from Turkey where exchange rates are part of the inflation story, the highest rates of increase are in Hungary, Czechia and Poland.
- The surprising indicator is unemployment which remains low (or relatively so) in most countries. Even for Spain and Turkey, the latest rates are well below those typically seen in times of economic crisis and for countries such as Germany, Netherlands, Switzerland and the UK, the current levels of people out of work are close to full employment.
- Turning to the trends for the market for machine tools, we only have estimates for 2022 from a handful of countries, with a mixed picture being seen. For Italy, the exceptional growth rate reflects the deliveries of machines ordered under the tax incentives that have been available over the past few years (see also the Italy report below). For each of the five countries for whom we have an estimate for 2023, the rate of growth is much slower than in 2022, with the UK expecting the market to contract a little as one of their investment support schemes ends.
- For cutting tools, there is a similar pattern, although the growth rates in 2022 don’t reach the heights seen for machine tools for Italy or Netherlands. However, we again see a slower rate of growth predicted for 2023 (where the estimates are available), with the UK predicting a small fall in demand.
The State of Trade report is attached below and should be read in conjunction with these highlights.
You can follow regular economic updates from CELIMO on both LinkedIn (@celimo-eu) and Twitter (@celimo_eu).