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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 edged up in October to 54.3 and is still, in theory at least, pointing to an expansion of activity in the sector globally. We are still having the problem that the lengthening suppliers delivery times are giving an incorrect positive driver to the PMI calculation - it has a relatively low weight but the extremely long delays are leading to readings that are higher than they should be.

We see this quite well in the UK figures where the overall PMI increased to 57.8 (from 57.1 in September) despite the output element being only marginally above 50 - its weakest pace for 8 months. Along with the longer supplier’s delivery times, there was also an improvement in manufacturing new orders (despite a drop in export work) and employment.  In essence, the longer delivery times (weight 15%) is outweighing the lower output growth (weight 25%) and raising the value of the index which is also supported - genuinely - by an increase in total orders;  the flat trend for output is an indication of the constraints on production from the supply chain difficulties.

In the Euro-zone as a whole, the overall PMI reading fell slightly to 58.3, its lowest reading since February and while this region is also seeing output constrained by supply chain shortages, there was also an easing of new orders (probably for the same reason - there is no point in placing orders if the manufacturers can’t deliver because of supply chain shortages).  There were, however, some variations between the eight Euro-zone countries covered by the IHS Survey - Netherlands, Italy, Ireland and Greece (the first three have the strongest PMI readings in this region) saw a higher PMI reading in October, while Austria, Germany, Spain and France all saw a fall.  Bearing in mind our caveat around the delivery times metric, even France which at 53.6 is the weakest of these countries is still showing a positive trend.

Elsewhere in Europe, we see a similar mix of trends and levels;  Russia (which moved back into positive territory in October) Hungary and Poland saw their PMI reading improve and while they are all now positive, none are particularly strong.  On the other hand, Sweden (64.4) and Switzerland (65.4 - the strongest PMI in this analysis) both saw a reduction in their PMI in October although in both cases it is above 60 and so strongly positive that this is not just the effect of the lengthy delivery times and the fact that they fell is almost insignificant;  also in the category of falling PMI’s were the Czech Republic (to a still healthy 55.1) and Turkey (to a modest 51.2).

Most of the Asian countries saw an improvement in the PMI reading in October, although in then case of China (50.6) this only just moved it into positive territory following the neutral reading of exactly 50 in September. There was also a modest increase in Taiwan but in this case, it already had the strongest manufacturing PMI in the region and the more significant increases in Japan, India and the ASEAN region are probably more important.  South Korea was the exception in reporting a PMI of 50.2 which was down on the September reading (52.4).

That leaves the Americas where Canada and Mexico both saw a modest improvement in the manufacturing PMI although to different effect;  for the former this strengthened the PMI to 57.7 but for Mexico, this only moved it to 49.3 which means that this is one of only two countries (Myanmar within the ASEAN block is the other one - they have the lowest PMI in our coverage) where the manufacturing PMI is below 50.  The USA saw its PMI fall back to a still strong reading of 58.4 while a similarly sized fall in Brazil took the PMI reading down to a more neutral 51.7.

We have identified the strongest (Switzerland) and weakest (Myanmar and Mexico) overall readings.  The largest improvement compared to September was in the ASEAN region (+3.6 points) while the most significant reduction was in the Czech Republic (down by 2.9 points).

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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