Flash Purchasing Managers Index, May 2024: The flash Purchasing Managers’ Index (PMI) for the UK manufacturing sector jumped into positive territory with the reading of 51.3 being the highest since July 2022.
This was broadly based with both output and new orders indicating growth, although the latter was mainly from the home market with export orders described as “stabilizing”. The increase in production was at its fastest pace since April 2022. Business optimism, which is not part of the PMI calculation is reported to have “soared” to its highest level since February 2024. Following what now appears to have been a false start in March which was followed by the dip in April, this survey provides evidence that we may be on the turning point in the UK manufacturing sector.
The flash estimate for the Euro-zone is still firmly in negative territory at 47.4, but this is the highest for 15 months and is moving in the right direction. Similarly, the output element of the index improved to a 14-month high, although it too remains just below the crucial 50 threshold. Manufacturing employment is also still negative but this tends to lag the activity cycle; suppliers’ delivery times, not mentioned in the notes for the UK, continue to shorten and this also has a negative effect on the index.
We only have separate reports for France and Germany with the flash announcements; both of these saw an improved, but still negative flash estimate of their manufacturing PMI, accompanied by a similar improvement in output – the change was larger in Germany, but from a lower starting point. Similarly, for Germany (the report is not clear about the situation in France), although new orders continue to fall, this was at the slowest pace for two years, with export orders “stable”.
The US flash manufacturing PMI moved up from the neutral position in April to a small positive, led mainly by an acceleration of growth in output; however, at 50.9 it is lower than in either February or March. Employment also made a positive contribution to the calculation while the drag from falling orders eased while suppliers’ delivery times also continue to have a false downward effect on the index.
Finally, in Asia, we have three country reports with contrasting fortunes. India continues to be the star of both the region and the world at 58.4, although this is a second slight reduction from the peak we saw in March. Manufacturing orders, especially for Indian exports remain strong. Japan managed to tip the overall PMI into positive territory at 50.5 – the first above threshold reading for them since a one-off flirtation with expansion in May 2023 (before that it was October 2022). However, this is being driven by a renewed rise in stocks of purchases and longer delivery times, with both output and new orders still contracting. The flash manufacturing PMI for Australia was unchanged at 49.4, although this is the joint-highest reading for nine months.
These reports are available on the “PMI by S&P Global” website at https://www.pmi.spglobal.com/Public/Release/PressReleases or on request from MTA.
USMTO and CTMR, March 2024: The US Manufacturing Technology Orders (USMTO) programme tracks orders in the US market, based on the reports from participants in the survey. In the 1st quarter of the year (January to March), total machine tool orders declined by -18.2% compared to the same period of 2023 and the rolling-annual total is -13.8% lower than the previous 12 month period.
The AMT press release notes that orders from contract machine shops in March were at their highest level in the past 12 months, although the average monthly rate of business from this group of customers were lower in 2024 than in 2023. There was also an improvement in orders from manufacturers of Electrical generation and power transmission equipment.
The press release also notes that two regions are bucking the generally negative trend. Comparing the 1st quarter of each year, orders in the South-East region grew by +17% thanks to the prevalence of the aerospace sector, founded largely on defence spending; there was also growth, but of only +3%, in the Western area which was driven by orders from computer & electrical equipment manufacturers thanks to government and private investment in semiconductor manufacturing facilities.
The other 4 regions all saw business lower than in the 1st period of 2023 with reductions ranging from -14% in the South-Central area, through -27% in the North-East and -28% in the North-Central-West to -31% in the North-Central-East.
The US Cutting Tool Market Report (CTMR) tracks orders for tooling on a similar basis and for this part of the manufacturing technology spectrum, the market increased by +2.0% in the first quarter of 2024 (compared to the same months of 2023). However, after 3 years of growth from the pandemic low point, there are signs that cutting tool demand may have reached a peak, although it could equally be a trend that is affected by the timing of Easter.
The press release on this set of results notes that despite the issues restricting output Boeing, shipments to the aerospace and defence industries remains strong. It also has to be noted that the values derived from the participants reports are in nominal terms and inflation means that the growth noted above comes from price rises rather than volume increases.
You can download the press releases for the two surveys from the AMT web-site at https://www.amtonline.org/topic/intelligence, with the CTMR release also published on the USCTI web-site at www.uscti.com (go to the News tab); alternatively, you can request either or both releases from MTA and we can make sure you get them when they are published each month. We have attached a set of charts tracking the rolling 12-month totals from these two surveys which you can download below.
Japanese Metal Cutting Machine Tools Orders, 1st Quarter 2024: The Japan Machine Tool Builders Association (JMTBA) also publish monthly orders data, although in this case, it covers business done by Japanese manufacturers rather than the market and only those who build metal cutting machine tools (there is a separate association in Japan for manufacturers of metal forming machines). However, given the relatively low import ratio in Japan, the domestic orders series will be a good guide to the market situation.
Total orders in the 1st quarter of 2024 quarter were +2% up on the previous period but -8% lower than a year earlier. Orders from the Japanese market were +7% higher than in Q4-23 but -15% down on Q1-23, while export orders had more modest trends of -1% and -5% respectively.
The JMTBA report gives a breakdown of the domestic orders by industry and taking the quarter-on-previous-quarter trend, the fastest growth was from the electrical machinery industry (+71%) but this was also one of the weakest sectors when compared with a year earlier with a fall of -24% compared to the 1st quarter of 2023. The largest customer sector by value is industrial machinery (a very wide ranging sector that includes many product groups including construction machinery and die & mould companies); this saw growth rates of +12% and -19% respectively on the same basis.
The automotive industry saw demand fall by -11% on the previous quarter and by -6% compared to a year earlier, while aerospace had trends of -12% and +4% respectively (the latter is a relatively small industry in Japan).
Analysis of export orders for the 1st quarter of 2024 shows a mix of trends; export orders from the UK fell by -11% compared to Q1-23, although this is a relatively small part of the market, accounting for less than 2% of the total. The four largest single-country markets for Japanese manufacturers of metal cutting machine tools are China (29% of the total and down by -15% compared to a year ago, USA (27% and down by -3%), India (6% and +45% higher than last year) and Germany (5% and down by -18%). Overall, orders from export customers accounted for just over 70% of total business in the 1st quarter of 2024.
You can access the JMTBA report at https://www.jmtba.or.jp/english/category/machine-tool-orders/ (April 25, 2024) or we can send you the summary of the data – contact Geoff Noon at MTA (email: [email protected]) if you want this analysis. A chart showing the 12-month rolling totals is available to download below.