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PURCHASING MANAGERS’ INDEX (PMI)

The Global analysis of the Purchasing Managers’ Index (PMI) for manufacturing produced by J P Morgan using the data from IHS Markit showed one of the fastest expansions in activity in almost a decade in November with the global PMI at 53.7, although it was briefly above this point at the start of 2018.

The UK shared in the good news with the manufacturing PMI improving to 55.6, its highest level in 35 months and more than reversing the small reductions we saw in September and October.  There was further good news in that the investment and intermediate goods sectors registered robust and accelerated rates of growth in output, although the consumer goods sector is still struggling.  This needs to be tempered a little by evidence of stock building ahead of the end of the Brexit transition period which is evident in the significant growth in stocks of inputs and by the tenth consecutive fall in the number of jobs in the UK manufacturing sector.

The Euro-zone was the one area to buck the general trend of improving PMI readings in November although the latest figure of 53.8 still implies a reasonable rate of expansion in activity.  However, like the UK, there is a noticeable divergence at the sector level with investment and intermediate goods expanding strongly while the consumer goods producers saw a small fall in operating conditions for the first time in 6 months.  Only Ireland and the Netherlands (the latter had the strongest improvement in November) bucked the general trend and France and Spain slipped just below the crucial 50 level where they joined Greece which now has the weakest PMI reading among the countries/regions that we track each month (as well as the largest fall int eh PMI reading compared to October).

Outside of the Euro-zone, the rest of Europe was generally positive, although the manufacturing PMI did weaken in both Russia (where it is below 50) and Turkey and was unchanged for the 3rd consecutive month in Poland.

In Asia, only India saw a lower PMI reading compared to October but this is still very strong at 56.3, so not really a cause for concern.  The smallest improvement was in Japan which is also the only country in this region where the PMI is below 50;  this is now a run of 19 consecutive months (and 22 of the last 23 months) in negative territory going back to early 2019.

There is a mix of trends in the Americas;  Brazil was the only country to see the PMI fall but it remains the strongest reading among the countries/regions that we track at 64.0, while there was almost no change in Mexico which ahs the 2nd weakest reading at 43.7.  There was an improvement in the manufacturing PMI for the USA which took it to 56.7, its highest level since early in 2014, while Canada edged up to 55.8.

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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