The rebound of the global manufacturing sector continued to gain traction in August. At 53.1, up from 50.0 in July, the JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) posted it highest reading for 26 months and rose above the neutral 50.0 mark for the first time since May 2008.
Production increased for the third month running in August and at the fastest pace for 40 months. The expansion was broad based by nation, with gains especially marked in the U.S. (growth at a near four-year high), Japan (3.5-year high) and emerging Asian economies. The rate of expansion in China hit a 22-month peak, but in India eased to the weakest in the current period of recovery.
European economies tended to lag behind the rest of the nations surveyed. However, output growth was signaled in the Eurozone for the first time since May 2008 and gains recorded in the United Kingdom and Eastern Europe. Within the Eurozone, the 'big-two' of France and Germany led the upturn. Growth was muted, however, by the continued weakness of Italy and Ireland. Spain reported a drop in output following an increase in July.
Manufacturing new orders rose in August to the greatest extent since July 2004. Rates of increase hit 56-, 41- and 23-month highs in the U.S., Japan and China respectively. The Eurozone and Brazil saw slight gains in new orders for the first time since March 2008 and August 2008. Gains were posted in almost all of the euro member nations, the exceptions being Italy and Ireland. The U.K. and India saw growth of new work ease compared to July. Increased levels of new export business were also reported by global manufacturers.
August data pointed to a reduction in global manufacturing employment for the 17th month running. However, the rate of job losses eased to the weakest for a year. The decline remained broad-based by nation, with only China and Turkey among the nations covered to report an increase.
Stocks of purchases fell at a rapid pace in August. Of the countries for which data were available, only India reported a rise in pre-production inventories. Subsequently, the forward looking new orders-to-stocks of purchases ratio rose to its highest level in the survey history.
Average input costs rose for the first time in 11 months in August, reflecting higher commodity prices. Cost inflation was especially marked in China, the U.S. and Russia. In contrast, purchase prices fell in the Eurozone, Japan and the U.K.
Commenting on the survey, David Hensley, director of global economics coordination at JPMorgan, said: "The manufacturing PMI rose back above the no-change mark for the first time since May 2008, as the rebounds in output and new orders gained real traction. Signs are that these gains will be sustained in the coming months, as the stock cycle remains supportive and the new orders-to-inventory ratio hit a record high. Job losses in the sector are abating as production and orders surge.”
