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PURCHASING MANAGERS’ INDEX (PMI)

The Global Purchasing Managers’ Index (PMI) for manufacturing produced by J P Morgan using the data from IHS Markit eased slightly in January but at 53.5 it remains positive and is still at a relatively high level historically.  This article only refers to the PMI for the manufacturing sector.

The UK PMI reading slipped from its peak from December as output growth eased and new orders fell slightly, with this mainly in export business.  We are also seeing the false positive from tightening supply chains - normally, this a good thing because it indicates everyone is busy, but in the current circumstances this is being driven by supply-chain issues from both Covid-19 and Brexit.  Another positive was that manufacturing employment increased for the first time in a year, albeit only marginally.

The Euro-zone overall (the IHS survey covers 8 countries in this region) saw a small fall in the PMI from the 2½ year high that we saw in December but this hides a mixture of trends in the individual countries.  There was strong growth in Italy and Greece (with the latter getting back to being right on the crucial 50 level) and a modest improvement in Austria, France and Netherlands but Ireland, Spain and Germany saw a fall in their PMI reading - Spain slipped in to negative territory and was at its lowest reading since last June.

In the other European countries covered by the IHS reports, most saw an improvement in the PMI reading, with Hungary and Turkey seeing the largest increase.  The only country to see a fall in the PMI was Sweden but this was to 62.4 (from 64.7) so they still have the highest reading among the countries/regions that we cover.

Looking at Asia, we find the only other country with a manufacturing PMI reading above 60 in Taiwan;  they were part of a general trend of improving readings in this region, although that was not shared by China and Japan with the latter just slipping below the crucial 50 level.

The Americas region remains the most mixed both in terms of trends and levels;  there was a modest improvement in Mexico but at 43.0, this is still the lowest PMI reading in our report, while the only other improvement compared to December was in the USA which, at 59.2, has one of the highest readings.  Both Canada and Brazil saw a substantial fall in the PMI level compared to the previous month although both remain well into positive territory.

We have already mentioned the strongest and weakest PMI’s among the 25 countries and 2 regions that we cover but the largest changes compared to December were a fall of 5.4 points to 51.8 in Ireland and the 3.6 points growth to 54.4 recorded in Turkey.  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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