Global manufacturing PMI climbs to 39-month high

At 54.4 in October, the JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) posted its highest reading since July 2006. The PMI has remained above the neutral 50.0 mark for four successive months. All of the national PMIs for the world's major economic regions covered by the survey – the United States, the Eurozone, Japan, China, the United Kingdom and India – were at levels consistent with growth.

The main factors underpinning the latest rise in the global PMI were substantial gains in output and new orders. The labor market also moved closer to a stabilization level, with the rate of job losses only marginal and the slowest since July last year.

The Global Manufacturing Output Index rose to 58.4 in October, its highest reading since July 2004 and a figure consistent with growth of global IP of more than 12 percent saar. Manufacturing output rose at the fastest pace in 63 months in the U.S. Japan reported a further marked increase in production, as did China, the U.K. (fastest in almost two years), France and India. The highest index reading was registered by Taiwan. Growth in the Eurozone was the quickest since January 2008. The positive contributions of Germany, France, Italy, the Netherlands and Austria were offset by contractions elsewhere.

New orders rose for the fourth month running in October. The Global Manufacturing New Orders Index posted 56.9, broadly unchanged from 57.0 in September. With the exceptions of Spain, Ireland, Greece and South Africa, all of the nations for which October data were available reported an increase in new work received. The trend in international trade volumes continued to improve, with growth of new export orders at a 21-month high.

At 49.7 in October, the Global Manufacturing Employment Index pointed to job losses for the 19th month in a row. However, the rate of decline was only marginal. Staffing levels were increased in the U.S. (first time in 15 months), China (fastest pace in survey history), India, Taiwan, South Korea and Turkey.

The latest data also suggested that cost pressures were rising. Input prices increased for the third month running and at the fastest pace during this period. Cost increases were recorded across much of the global manufacturing sector. Notable exceptions to the higher costs trend were Japan and Germany. Rates of increase were especially high in the U.S., Taiwan, Russia, Turkey and the U.K. Costs in the Eurozone rose for the first time in 12 months. Adding to this, average vendor delivery times – a reliable bellwether of supply side price pressures – deteriorated to the greatest extent in just over three years.

Commenting on the survey, David Hensley, director of global economics coordination at JPMorgan, said: "October saw the global PMI resume its upward trend, following a pause in September, to reach a 39-month high. Gains in production were especially robust, with global IP now rising at a rate of over 12 percent saar. New orders increased at a solid clip and the labor market neared stabilization, both positive indications regarding the sustainability of the rebound in the sector."