The flash manufacturing sector Purchasing Managers’ Index (PMI) for June, published by S&P Global, fell in all of the countries that have this stage of reporting. For the UK, the overall manufacturing PMI fell to 53.4 which is it lowest level since July 2020, the output element was down to 51.2 and the orders series was described as being “slightly below the crucial 50 level”. As has been the case for some time, the higher level of the overall PMI is mostly due to the still extended suppliers delivery times which, perversely, are a positive in the calculations.
Similarly, in the Euro-zone, the overall PMI fell significantly to 52.0 (from 54.6 in May) which is its lowest since August 2020 with the output element negative with its lowest reading for two years and orders also below the crucial 50 level. Activity remains constrained by supply chain issues linked to the Ukraine war and lockdowns in China; although these have eased slightly this month, this may in part be due to a lower level of demand for inputs which stalled this month.
At this stage, only France and Germany have separate reports and both showed a reduced positive manufacturing PMI reading of 52.0 and 51.0 respectively and in both cases the output element was below the crucial 50 level, most significantly in France where it fell to 45.7 (a 25-month low). Staying in France, respondents to the survey indicated that this was due to the adverse impact of rising prices on demand.
In Germany, while the output element was negative (49.0) it was higher than in April so this is only a 2-month low in this case. However, this is masks the underlying situation to some extent with work on backlogs making up for steep and accelerating fall in new order intake that was at its sharpest for two years. This was especially true in export markets where German manufacturers commented that this was due to the impact of the war in Ukraine, covid lockdown disruptions in China, elevated prices and high stock levels among customers.
Elsewhere, only the USA and Japan have flash PMI releases. The overall manufacturing PMI in the USA showed the sharpest fall in the current round – it was down to 52.4 for June (from 57.0 in May) – with the output element negative at 49.6 and, as with the Euro-zone, orders also fell in the month. Although weaker than in any month since the start of 2021, suppliers delivery times continues to be the main reason why the overall PMI is above the crucial 50 level.
The news for Japan is slightly better as although the overall manufacturing PMI fell to 52.7; this is only a little lower than in May and the output element was above the 50 level suggesting that it is still growing. However, new orders fell for the first time in nine months and the index was supported by a marked lengthening of suppliers delivery times which was exacerbated by materials shortages and the loser links to China where the covid lockdowns have disrupted supply chains.
These reports are available on the “PMI by S&P Global” web-site at https://www.markiteconomics.com/Public/Release/PressReleases?language=en or on request from MTA.