Global manufacturing recovery continues; PMI down 0.9 points to 55.2

The recovery in the global manufacturing sector continued in February. At 55.2, down slightly from 56.1 in January, the JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) posted its second-highest reading in almost four years. The average reading so far in the first quarter 2010 (55.7) is above that for the fourth quarter of last year (54.2).

The headline Manufacturing PMI has remained above the no-change mark of 50.0 for eight successive months.

At 57.4 in February, down from 60.2 in January, the Global Manufacturing Output Index signaled an expansion in production for the ninth month running. Although the lowest reading in three months, it was still consistent with a marked increase in production and well above the series average.

The United States and China continued to report above global average rates of expansion, despite seeing growth ease sharply to five- and three-month lows, respectively. Output in Japan rose solidly, but at the slowest pace since last November. Growth in the Eurozone hit a near three-year high, but disparities remained between the fast expanding manufacturing sectors of Germany, Austria and France and the deepening downturn in Greece. United Kingdom output rose at the quickest rate since September 1996.

Levels of new work received rose for the eighth month running in February. The rate of growth remained robust, but eased noticeably over the month to its weakest since last November.

Meanwhile, new export orders rose at the fastest pace in more than 5.5 years. Of the countries for which exports data are collected, only Greece reported a decline in February.

Global manufacturing employment increased for the second month running in February, with the latest data pointing to a further slight gain in staffing levels. After rising in almost every month since hitting a record low last February, the Global Manufacturing Employment Index reached a 29-month high of 51.4. Among the major industrial regions covered by the survey, jobs were added in the U.S. (steepest since January 2005), China and the UK. Employment fell in Japan and in all of the Eurozone nations.

February data signaled a further substantial increase in average purchase prices, with the rate of inflation only slightly below January's 17-month high. Part of the increase reflected supply chain pressures – resulting from low stock holdings at suppliers – as highlighted by the sharpest deterioration in vendor performance since August 2004.

Although stocks of purchases fell for the 35th consecutive month in February, the extent of the depletion was the weakest since August 2008. Inventories generally fell in Western Europe and the U.S., but rose in Japan, China and India.

Commenting on the survey, David Hensley, director of global economics coordination at JPMorgan, said: "The recovery of the global manufacturing sector continued in February, but the rate of expansion has eased back from the highs recorded around the turn of the year. The upturn is likely to be sustained in the coming months, as growth is still coming from a broad-base and labor markets are moving closer to stabilizing. Levels of new orders are rising, and there are signs that international trade is continuing to strengthen."