Pace of recovery in global manufacturing sector eased in June

Growth of the global manufacturing sector eased again in June. At 55.0, the JPMorgan Global Manufacturing Purchasing Managers’ Index was down further from the near record high reached in April. Although the rate of improvement eased to its weakest in the year-to-date, it was still solid and above the series average.

Manufacturing production rose for the 13th month in a row in June. The rate of growth remained marked, but eased to its weakest since last November. The average reading for the Global Manufacturing Output Index (59.1) during Q2 2010 was the highest since Q2 2004.

Despite easing sharply to a three-month low, growth of production in the United States remained rapid and above the global average. Rates of expansion also eased in emerging Asia, Japan, the United Kingdom and Australia. Growth of output picked up slightly in the Eurozone, but this followed a sharp slowdown in May.

Growth of new orders continued to slow in June. The rate of expansion in new work received eased further from April's near survey record pace to an 11-month low, but was still above its long-run average. National PMI New Orders indices fell in the U.S (eight-month low), the Eurozone (weakest expansion in the year-to-date), Asia (one-year low) and the U.K. (seven-month low), but in each case continued to signal expansion.

Growth of new export orders also eased sharply to a six-month low in June. Rates of increase slowed in the majority of the national manufacturing sectors covered by the survey.

June data pointed to a further increase in manufacturing employment, reflecting growth of output and rising backlogs of work. Staffing levels have increased in each month so far during the year-to-date, with the latest rate of expansion in jobs slightly above the average for that period. Employment continued to rise in all of the major industrial regions covered by the survey.

Inflation of average input prices eased sharply in June, with the latest data pointing to the weakest rate of increase since last December. Cost inflation slowed across most of the national manufacturing sectors covered by the survey. The extent of the easing was most pronounced in the U.S. and emerging Asia.

Upward pressure on purchase prices remained closely linked to supply chain forces in June. Areas experiencing the sharpest increases in costs, such as Europe, also continued to report substantial lengthening of vendor lead times. In the U.S. and Asia, where costs rose at much reduced rates, the deterioration in vendor performance tended to be less pronounced.

Commenting on the survey, David Hensley, director of global economics coordination at JPMorgan, said: "June PMI data provided further evidence that growth of the global manufacturing sector is cooling from the red hot rates seen earlier in the year. However, while rates of expansion in production, new orders and employment all eased over the month, growth remains solid overall and above long-run trend. The sector therefore approaches Q3 on a firm footing, but mounting headwinds could temper growth later in the year."