Conditions in the global manufacturing sector remained relatively weak in May. Although the JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) posted above the critical no-change mark of 50.0 for the 59th successive month, at
50.4, it stayed at a level indicative of only negligible improvement in the overall health of the sector.
Manufacturers experienced further marked upward pressures on average purchasing costs in May, with the rate of input price inflation hitting a survey record high. The main factors underlying the latest increase in costs were rising oil, energy, fuel and food product prices. The high cost of oil also fed through to increased transportation costs and hikes in the prices for a number of oil by-products. All of the PMI surveys for which May data were available reported sharp increases in purchasing costs, led by South Africa and the United States – with the rate of inflation in the U.S. hitting a four-year high. The Global Manufacturing Input Prices Index posted 76.3.
Manufacturing output expanded again in May. However, anecdotal evidence suggested that higher production was partly sustained through companies making in-roads into levels of outstanding business, as new work received posted a further decline. Job losses were recorded for the second month running – the first back-to-back reductions in employment for 4.5 years – as some companies trimmed non-essential staff in response to subdued market conditions and to offset part of the rise in costs.
The Global Manufacturing Output Index posted 51.3 in May, rising further from March's low of 50.8, but still well below its long-run average of 54.3. Production rose in the U.S. (after contracting in the previous two months), the Eurozone (although growth was unchanged from March's low), China and India. Output stagnated in the United Kingdom, and declined at the fastest rate for more than six years in Japan.
At 49.7 in May, the Global Manufacturing New Orders Index signaled that the level of new work received had fallen for a second successive month. However, the rate of contraction was only minor and slower than in April. New orders declined across many of the world's major industrialized nations, including the U.S., the Eurozone, Japan (sharpest drop since January 2002) and the U.K. In contrast, sharp gains in new business were recorded for China, India and Denmark.
The level of international trade continued to rise in May. Gains were especially marked in the US, where the weak dollar exchange rate contributed to the fastest growth of external trade for four years. Conversely, Eurozone manufacturers saw export business decline for a second consecutive month.
Staffing levels declined for the second month in a row in May, as highlighted by the Global Manufacturing Employment Index registering 49.3, from 49.6 in April. Although indicative of only a moderate decline in staffing levels, this was still the lowest reading posted by the index for 55 months. Jobs losses were reported for the U.S. and the U.K. The Eurozone, Japan, China, India and Brazil all reported higher employment.
Commenting on the survey, David Hensley, director of global economics coordination at JPMorgan, said: "Although the Global PMI stabilized just above the stagnation mark of 50.0 in May, growth in the manufacturing sector remained soft overall. Further declines in new business and employment also suggest that conditions are becoming increasingly tight, as manufacturers face record increases in average purchase prices and a slower outlook for global markets."
The Global Manufacturing PMI is calculated as a weighted average of the New Orders (30 percent), Output (25 percent), Employment (20 percent), inverted Suppliers' Delivery Times (15 percent) and Stocks of Purchases (10 percent) indexes.