It was a mixed picture for the manufacturing Purchasing Managers Index (PMI) data produced by S&P Global that was published this week. Although the global figure slipped into negative territory for the first time since last December and, inevitably, many countries also had a negative trend, the UK was among those which bucked the trend and recorded an improved PMI thanks to growth for output, new orders and employment.
The Global Purchasing Managers Index (PMI) for manufacturing, produced by S&P Global and sponsored by J P Morgan, fell significantly in July and, at 49.7, this is the first negative reading since last December. We explore the national trends below, but the main driver is noted to be a negative input from orders and stocks of purchases; employment was unchanged in the global average and although output increased, this was much less of a positive in the calculation than it has been recently. There is more bad news here because output of the investment goods industries was negative for the 2nd month in a row with the overall growth coming from the consumer and intermediate goods sub-sectors.
There is positive news for the UK with the manufacturing PMI for the UK improving to 52.1 (from 50.9 in June) – this is its highest level for exactly 2 years and there have now been three consecutive positive readings which suggests that the recovery is broadly based. Growth in both new orders and output strengthened, leading to the first increase in employment since September 2022. The increase in output was spread across all three of the sub-sectors, including investment goods, and new orders rose at their fastest pace since February 2022; this came entirely from the domestic market, with export orders falling again, albeit at the weakest pace since the downward trend began 29 months ago.
The one slight note of caution is that the index continues to be inflated by a continued lengthening of suppliers’ delivery times; this is interpreted in the calculation as a sign of increased activity when, for now at least, it is being caused by supply-chain constraints such as shipping delays (and increased costs) due to the disruption in the Red Sea.
The situation in the Euro-zone remains weak; although the overall manufacturing PMI for the region was unchanged from its June level, the reading of 45.8 implies significant fall in activity for the sector as well as hiding a range of different trends. The fall in orders which has been running since May 2022 accelerated slightly and output also fell, this time at its fastest pace this year. Manufacturing employment also fell at its fastest pace since December 2023 but, unlike the UK, suppliers’ delivery times continued to shorten (further reducing the PMI), although at the weakest rate for 6 months.
At the country level, only Italy and Ireland had a higher manufacturing PMI than in June – for the latter, which had the largest rise in its reading in this report, this was enough to take them just above the crucial 50 mark. Spain and Greece are the other Euro-zone countries with a positive reading, although for them, the July figure was down on the previous month. Austria (which had the lowest reading in this report), France and Germany (which was only a fraction above the Austrian figure) all saw their already contractionary readings fall back further where they were joined by the Netherlands which had a sharp fall in its PMI to their lowest level since January.
Elsewhere in the European Union, Sweden shared the same fate with the largest fall in its PMI compared to June across this whole report taking them into negative territory (in this case for the first time since February). Lower readings also took Czechia further below the 50 threshold, while Romania, which had been exactly on this mark in June also recorded a lower figure in July. The manufacturing PMI for Hungary was virtually unchanged at a sub-50 level and despite a significant improvement in Poland, this was not enough to take them out of the “negative” group.
For the other European countries, Switzerland and Turkiye both saw their already negative manufacturing PMI slip even lower and Kazakhstan, which had the same trend, it remains in positive territory.
All of the Asian countries/region in this report, with the exception of Australia where the index edged up while remaining negative, saw a fall in their manufacturing PMI compared to June. However, this hides a range of positions across the region; most notably, the reduction in the ASEAN region and India was only marginal and the latter continues to have the highest PMI reading across this report (and it is worth noting that this was a rare report in noting that export orders expanded at a rapid pace). Despite the lower reading, it remains positive in South Korea and Taiwan, but the neutral value in Japan in June has turned negative for the first time since April and a sharper reduction in the PMI for China saw them recorded their first sub-50 reading since October 2023.
There was a mixed picture for the American continent with Mexico and the USA both seeing their index slip into negative territory in line with the global trend – for the latter, although output remained positive, it was a new orders falling for the first time in 3 months that caused the index to slip back. Canada also recorded a lower reading than in June but they were already in negative territory. Brazil had a solid improvement in its already positive manufacturing PMI, while Columbia managed to edge up to stand at exactly 50.0.
Overall, of the 27 countries and 2 regions that we report on each month, 10 were above the 50 threshold that marks the division between contraction and expansion of activity in the manufacturing sector and 1 more was exactly on this mark.
The manufacturing PMI is a weighted composite index of new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%).
The individual S&P Global PMI reports are available to download on their website at https://www.pmi.spglobal.com/Public/Release/PressReleases but we also have a summary charts report which is available to download below. You should note that the PMI readings for Hungary, Sweden and Switzerland are not compiled by S&P Global but can be found with an appropriate internet search (it also means that they are not part of the global PMI calculation).