The Global Purchasing Managers’ Index (PMI) for manufacturing produced by J P Morgan using the data from IHS Markit fell back to a 6-month low of 54.1 in August; however, this remains a significantly positive number which points to an expansion of activity in the manufacturing sector. 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.
Following falls in the two previous months, the manufacturing PMI for the UK only edged down a fraction in August to stand at 60.3. Companies recorded solid gains in output, new orders and employment despite the impact of shortages of inputs and delivery delays which disrupted production schedules; this had led to slower growth in output and marked increases in input prices. In response to questions that are part of the survey but not the calculation of the PMI, firms reported an increase in confidence and a significant majority expected output to rise over the coming year.
Although the PMI for the Euro-zone is a little higher than for the UK at 61.4 these are not directly comparable and there is more significance in the fact that this represents a larger slowdown in the pace of expansion in the sector having been at 62.8 in July. Most of the Euro-zone countries included in the aggregate saw a modest fall in the manufacturing PMI compared to the July level with Italy (60.9), Spain (59.5) and Greece (59.3) the only exceptions - indeed, Greece saw the highest improvement between July and August at +1.9 points; the largest reduction in August was in Germany (62.6 from 65.9 in July). However, there are two important messages from these figures; they are still pointing to a substantial rate of expansion in activity in the manufacturing sector and growth at investment goods makers (where most customers for manufacturing technology are classified) continues to lead over both consumers goods and intermediate goods producers, as it has done in each of the past 12 months.
In the other European countries, it is a similar story with the manufacturing PMI generally lower than in July - the exceptions here were Turkey (54.1) and Hungary (55.9) which both ticked up by 0.1 point in August. While Sweden saw the largest fall in the PMI - 5.2 points lower than in July at 60.1 - this was, like the Euro-zone countries, still pointing to strong expansion as was Switzerland which still has the highest manufacturing PMI in our analysis at 67.7 despite falling from the record level it saw in July (71.1). Before we leave this region, we have to note our first country with a PMI in negative territory in Russia which saw the reading ease again from the July level to 46.5.
The trend in Asia was consistent with the 5 countries and one region all seeing a lower manufacturing PMI than in July but there are some differences in the levels. The reading for Taiwan (58.5) remains at the high positive levels we see in most of Europe but Japan (52.7), India (52.3) and South Korea (51.3) have more modest positive readings. Most significantly however, China (49.2) slipped below the crucial 50 level for the first time since April 2020 and the ASEAN region recorded the lowest reading in our analysis in August at 44.5.
We conclude this world tour in the Americas where Canada (57.2) was one of the few countries to see the PMI improve in August and the reading for the USA remains strong at 61.1 despite being lower than in July. The PMI for Brazil fell quite sharply but remains positive at 53.6 but Mexico saw its already negative index weaken further to 47.1.
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