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PURCHASING MANAGERS’ INDEX (PMI)

There was something of a mixed bag in the Purchasing Managers’ Index (PMI) data for manufacturing that was published this week, but the overall trend was positive and the global composite produced by J P Morgan using the data from IHS Markit edged up to 52.3, its highest level in 25 months.  This article refers only to PMI’s for manufacturing.

For the UK, the PMI fell slightly but the reading of 54.1 (55.2 in August) still points to a robust growth rate.  It is important at this point to remember that the PMI is a measure of month-on-month change and not of levels so, given the very sharp fall in April and the below 50 readings in the months either side, there is still a long way to go in the recovery cycle.  The positive trend in the UK was driven by higher levels of both orders and output with new work coming from both domestic and overseas markets.  However, with structural adjustments still happening, employment fell for the 8th consecutive month.

In the Euro-zone, the overall PMI increased to 53.7 (51.7 in August), its strongest reading since August 2018.  This was led by Germany where the PMI accelerated to 56.4 making it the highest of the 8 Euro-zone countries included in the calculation for the first time since May 2017.  However, as with the UK, the Euro-zone and its individual countries are nowhere near reversing the Covid-19 induced downturn in the Spring.  Six of the eight countries are in positive territory this month with the other two (Ireland and Greece) right on the dividing line at 50.0 - only Ireland saw its PMI fall compared to August although Italy and the Netherlands only increased marginally.

It is elsewhere in Europe that we start to see more mixed results.  We track 7 countries and 3 of those - Hungary, Russia and Turkey - saw substantial weakening of the PMI in September, with the first two seeing the level dip back into negative territory.  Of the others, the PMI edged up in Poland, with a more substantial increase being recorded in the Czech Republic (which at 50.7 was in positive territory for the first time since November 2018), Sweden and Switzerland.

The picture in Asia is also mixed, although we don’t yet have the data for Korea and Taiwan.  There was a strong increase in the PMI reading in India but that is where the good news ends;  while Japan also recorded an increase, its reading of 47.7 (47.3 in August) means that it has not yet recorded a positive reading (above 50) since before the current crisis began so recovery is not yet underway (only slower declines).  The PMI for China edged down but remains positive while there was a modest fall in the PMI for the ASEAN region which, like Japan, has yet to register a reading above 50.

In the Americas, the trends were all positive, although the USA (53.2) and Brazil were only marginally better than in August;  Canada (56.0) and Mexico saw modest improvements in their PMI reading, but Mexico remains the lowest across the 27 countries/regions that we track each month at 42.1.  Brazil remains the strongest country with a PMI of 64.9.

The largest movers compared to August were India (up 4.8 points) and Germany (up 4.2 points), while the weakest performance came in Hungary (down 3.5 points).

The IHS Markit PMI reports for major economies around the world are available from their web-site at http://www.markiteconomics.com/Survey/Page.mvc/PressReleases;  we have compiled a set of summary charts which is available to download below.

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