ALL: Global Manufacturing PMI

Tue Sep 01 10:00:00 CDT 2015

Actual Previous
Level 50.7 51.0

Growth in the global manufacturing sector remained lackluster in August with a reading of 50.7. The reading is the lowest since July 2013. The rate of expansion in production volumes eased to the weakest in 28 months and the pace of new business stayed close to recent lows. Price inflationary pressures are also muted, with input costs and selling prices showing little change during the month."

The average so far in 2015 (51.3) is below the average for 2014 as a whole (52.3), suggesting that a solid rebound in growth will be needed if the sector is to even match last year's tepid pace. Manufacturing production increased for the thirty-third successive month in August. However, the rate of expansion was the weakest since April 2013, as the downturn in emerging markets accelerated and growth slowed in the developed world.

The Czech Republic, Italy, Spain and Germany recorded the fastest rates of output expansion during August. The US, due to its large relative size, was also a significant contributor to the latest increase in global manufacturing production, despite growth in the nation easing to a 19-month low. Conditions continued to strengthen in the Eurozone, with output growth accelerating to a 15-month high.

The main drags on the global average were contractions in China, France, Taiwan, South Korea, Indonesia, Malaysia, Russia, Greece and Brazil. There were some pockets of growth in Asia, however, with expansions in Japan, India and Vietnam.

Inflows of new orders in the global manufacturing sector also rose only moderately during August. A faster rate of contraction in emerging markets (which also reported a drop in new export business) partly offset quicker new order growth across developed nations (who also saw export orders rise). Global manufacturing employment rose for the twenty-fifth successive month in August, although the rate of jobs growth eased closer to stagnation.

J.P. Morgan Global Manufacturing PMI gives an overview of the global manufacturing sector. It is based on monthly surveys of over 10,000 purchasing executives from 32 of the world's leading economies, including the U.S., Japan, Germany, France and China which together account for an estimated 89 percent of global manufacturing output. It reflects changes in global output, employment, new orders and prices. The Global Manufacturing PMI is seasonally adjusted at the national level to control for varying seasonal patterns in each country and is produced by J.P. Morgan and Markit Economics in association with ISM and the International Federation of Purchasing and supply Management (IFPSM).

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. The J.P. Morgan Global Manufacturing PMI provides advance insight into the global manufacturing sector, which gives investors a better understanding of business conditions and valuable information about the economic backdrop of global markets. The stock market likes to see healthy economic growth because that generally translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures. The PMI data are also used by many Central Banks to help make interest rate decisions.

The J.P. Morgan Global Manufacturing PMI data give a detailed look at the manufacturing sector including the pace of manufacturing growth and the direction of growth for this sector. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. In addition, its sub-indexes provide a picture of output, employment, new orders and prices.