Global manufacturing shows solid growth, but PMI slips slightly to 57.2

The JPMorgan Global Manufacturing Purchasing Managers' Index fell slightly from April's near-record high of 57.8 to 57.2 in May. Although signaling a slight easing in the overall rate of expansion, this was still the second-fastest rate of growth during the past six years.

Manufacturing output expanded for the 12th consecutive month in May. Although the rate of increase eased from April's 75-month high, it was among the fastest recorded in the survey history. Rates of expansion in manufacturing production held up well in the United States, Japan and the United Kingdom, staying close to recent highs in both the U.S. and the U.K. and accelerating to a five-month peak in Japan. Growth eased sharply in the Eurozone and the Asia (excluding Japan) regions.

In the euro area, the rate of expansion in output remained well above its long-run survey average despite the rate of growth easing to the greatest extent during that history. This reflected not only a steep slowdown in Germany, but also weaker growth in the other euro area nations covered and an accelerated pace of decline in Greece.

May saw a similar modest easing in growth of global manufacturing new orders following the six-year high reached in April. New export orders continued to rise at a rapid pace. Almost all of the nations for which data were available reported an increase in new work received, but in most cases the rate of expansion was slower than in April. Greece was the only nation to report a decline in new orders. However, growth in the U.S. held steady at the previous month's elevated pace, while Japan saw new orders rise at the fastest pace since last October (albeit still slower than the global average).

Global manufacturing employment increased for the fifth successive month in May, with jobs added at the fastest pace in six years. The sharpest growth in staffing levels was recorded in the U.S. Employment rose in Japan, the Asia (excluding Japan) region and, for the first time in two years, the Eurozone.

Cost inflation remained elevated in the global manufacturing sector. Input prices have now risen in each month since last August, with the latest rate of increase only slightly below April's 20-month peak. Higher purchasing costs reflected increased commodity prices, rising demand for raw materials and supply chain factors.

The latter was further highlighted by Purchasing Managers’ Index data on supplier performance. May saw a further marked lengthening in vendor lead times. The extent of the deterioration in performance in recent months has been exceeded in only one period – March to June 2004 – in the global survey history.

Commenting on the survey, David Hensley, director of global economics coordination at JPMorgan, said: "The latest PMI data suggests that the global manufacturing sector maintained both its solid growth momentum and broad-base in May. However, rates of expansion in output and new orders eased from their April highs, suggesting that this initial recovery phase may have already passed its peak. The labor market is gaining traction, with jobs added at the fastest pace in six years."