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PURCHASING MANAGERS INDEX FOR MANUFACTURING

The Global Purchasing Managers’ Index (PMI) for manufacturing produced by J P Morgan using the data from IHS Markit was 55.4, just a smidgeon lower than the June figure but, as we will see as we go around the world, there is a mixture of trends behind this figure.  Before we do that, a reminder that the PMI is an indicator of direction of change with anything above 50 implying expansion;  while there is some indication of the strength of expansion (or contraction if it is below 50), it is not a measure of levels.

This is well illustrated by the UK figures which showed the PMI for manufacturing falling back to 60.4;  although this is its lowest level since March, it still shows activity in the sector (it is calculated using an amalgamation of orders, output, employment, suppliers delivery times and stocks of purchases) expanding and points to this being at an historically strong level.  The measure of both output and new orders eased from recent months implying a move of responses from “up” to “same” (the fall is not enough to suggest much change in “down” replies) but there was an improvement in export orders with the investment goods sector leading this with reports of business from a range of markets including the EU (but with Brexit issues constraining this market).

The Euro-zone is similar with the PMI also at its lowest level since March but, at 62.8, still strongly positive.  The trend was similar for the countries that make up this measure with seven of the eight countries seeing a fall compared to the June level while remaining strongly positive - the exception was Germany where the manufacturing PMI reading improved at its highest level since April.  Interestingly, output eased in Germany (constrained by component shortages) but new orders and employment rose at near record paces.  The lower PMI reading was generally driven by slower growth in the output element of the index with orders still close to the record level recorded in March and the increase in employment was at the fastest rate in the 24-year history of the survey.

Elsewhere in Europe the picture is more mixed.  There was a very sharp rise in the PMI for Switzerland from what was already a strong point to 71.1 (making it the highest reading among the countries/group that we cover), a more modest improvement for Turkey (to 54.0), a small increase for Hungary (55.6) and a broadly flat position for Sweden (65.3).  On the other hand, the Czech Republic (62.0) and Poland (57.6) both saw their strong PMI readings slip back a little in line with the general trend for Europe, while Russia slipped further into negative territory at 47.5.

Similarly in Asia there is a mix of trends - there was a sharp turnround in India with the move from 48.1 in June to 55.3 for July being the largest improvement in the manufacturing PMI reading this month.  Taiwan had a more modest rise in the PMI (to 59.7) while the increase in Japan was lower both in the level and the change to stand at 53.0.  In contrast, there was a sharp deterioration in the PMI reading for the ASEAN region which fell by 4.4 points to 44.6 (this is both the lowest reading and the largest reduction compared to June).  There were also more modest declines in the PMI reading for China (to 50.3 - its lowest since April 2020) and South Korea (to 53.0).

Finally, there was an increase for the USA (to 63.4) and a small rise for Brazil (56.7) but a slight reduction in the reading for Canada (56.2) with all three in positive territory.  The other country here is Mexico which saw a modest improvement in its manufacturing PMI but at 49.6 it is still suggesting a contraction in activity in the sector in a run that now extends back to February 2020, just before Covid struck the global economy.

The IHS Markit PMI reports for major economies around the world are available from their web-site at https://www.markiteconomics.com/Public/Release/PressReleases and our summary charts report is available to download below.
 

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