Global manufacturers faced a stagflationary combination of weaker demand, falling output and rising cost inflation in July. At 49.0, the JPMorgan Global Manufacturing Purchasing Managers’ Index signaled that operating conditions had deteriorated for the second successive month and to the greatest extent in over five years. Amongst the major industrial regions covered by the survey, the performances of the Eurozone, Japan and the United Kingdom weighed heavily on the global PMI average, while operating conditions in the United States remained relatively subdued overall.
At 45.9 in July, the Global Manufacturing New Orders Index posted its lowest reading since the marked downturn in new orders recorded during the months immediately following 9/11. U.S. and Eurozone manufacturers saw levels of new business decline at the fastest rates since October 2001 and December 2001, respectively. Within the euro area, the contraction in Spain was especially notable. The drop in new orders to the U.K. was the sharpest in more than 9.5 years, while Japanese manufacturers also fared poorly. In contrast, the BRIC nations all reported increases in new orders in July. Growth of global trade volumes continued to slow and was only negligible in July.
Global manufacturing production edged lower for the second month in a row in July, as expanded output in the U.S. and BRIC manufacturing economies was more than offset by marked downturns in the Eurozone (fastest fall in 79 months), Japan and the U.K. (sharpest contraction since
late 1998). The Global Manufacturing Output Index registered 49.3, its lowest reading since March 2003.
At 81.1 in July, the Global Manufacturing Input Prices Index set a new survey record high for the third month running. High energy, food product, metal and oil prices remained the principal factors pushing up costs. Cost inflation was strongest in South Africa and the U.S. Meanwhile, China, Japan, the U.K., Brazil and Ireland all saw their respective rates of purchase price inflation rise to series records.
July data indicated the world manufacturing employment was little changed compared to levels one month ago. There was a marked recovery in the U.S. manufacturing labor market, where staffing levels rose following a marked reduction in June. Gains were also recorded in Japan and China. In contrast, the Eurozone and the U.K. reported further job losses.
Commenting on the survey, David Hensley, director of global economics coordination at JPMorgan, said: "Conditions affecting the global manufacturing sector were highly restrictive in July, as producers faced a corrosive mix of rising costs and waning demand growth. While all components of the global PMI index having trended down since the middle of last year, the declines have intensified of late and now suggest global manufacturing is contracting slightly at midyear. Moreover, this month's sharp fall in the new orders index points to continued weakness into the second half of this year."
