Global Manufacturing Sees Expansion in July for First Time Since January
The global manufacturing sector moved back into expansion territory in July, as output and new orders started to revive following the slump caused by the coronavirus disease COVID-19 outbreak. Business sentiment also started to recover, hitting a five-month high, but the labour market downturn continued with job losses registered for the eighth straight month. The J.P.Morgan Global Manufacturing PMI rose to a six-month high of 50.3 in July, up from 47.9 in June and back above the neutral 50.0 mark for the first time since January. Of the 27 nations for which July data were available, 13 had PMI readings above the neutral 50.0 mark
Key findings
Headline PMI rises to six-month high of 50.3 in July
Output and new orders return to growth territory
International trade volumes fall at slower pace
Manufacturing production rose for the first time in six months during July. Although the rate of expansion was only mild it was nonetheless the sharpest since the end of 2018. Growth was registered in the US, China, the euro area, the UK, Brazil and Australia among others. Due to their relative size, contractions in Japan, India and South Korea were the main drags on the nascent global manufacturing recovery.
July also saw incoming new orders increase for the first time in six months. However, with the restrictions in place to combat the spread of COVID-19 only being loosened, not removed entirely, the trend in international trade volumes continued to weaken. This also had an impact of supply chains, with average vendor delivery times lengthening for the twelfth successive month.
Sector data indicated that output rose across the consumer, intermediate and investment goods categories. The upturns in production and new orders were both led by the consumer goods industry. Output growth was comparatively mild at intermediate and investment goods producers, with the former seeing a decline in new orders and the latter a fractional rise.
Global manufacturing employment fell for the eighth month running in July, albeit at the slowest rate since March. Job losses were registered across the consumer, intermediate and investment goods sectors. Brazil was the only nation for which July data were available to see higher staffing levels. Of the remaining countries most (19 out of 27) saw their rates of job cutting ease, including China, the US, Japan, France, Italy, Spain, the Netherlands, South Korea, the UK and India. Germany was a notable exception with faster job shedding.
Average input costs rose at the fastest rate in 15 months during July. That said, the pace was still below the long-run survey average. Higher purchase prices were passed on (at least in part) to clients in the form of higher output charges. Subsequently, selling prices rose for the first time in six months.
Olya Borichevska, Global Economist at J.P.Morgan, said “The July PMI indicates that the recovery which began in May continued into mid-summer. Many of the PMI components reached their pre pandemic levels for the first time in July including output and new orders. The employment PMI has not recovered suggesting labor markets will take longer to improve. Still, to fully recoup the losses sustained in the first half of the year will still take some time, especially if the recovery is knocked off course by any future re-tightening of restrictions"
Source : STRATEGIC RESEARCH INSTITUTE