Global Manufacturing Downturn Gathers Pace in July

August 02, 2012 /

The global manufacturing sector slid further into contraction territory at the start of Q3 2012.

At 48.4 in July, the JPMorgan Global Manufacturing PMI posted its lowest level since June 2009. The PMI remained below the neutral 50.0 mark for the second straight month, to signal back-to-back contractions
for the first time since mid-2009. Europe remained the main source of weakness during July, while the performances of the US, Brazil and much of Asia were only sluggish at best.

Manufacturing PMIs for the Eurozone and the UK sank to their lowest levels for over three years. Within the euro area, the big-four nations fell deeper into recession, while Greece continued to contract at a substantial pace. Eastern Europe fared little better, with downturns continuing in Poland and the Czech Republic.

The ISM US PMI posted a sub-50.0 reading for the second successive month in July. Rates of contraction accelerated in Japan, South Korea, Taiwan and Vietnam, but eased slightly in Brazil and China. Brighter spots were Canada, India, Indonesia, Ireland, Mexico, Russia and South Africa, which all signalled expansion during the latest survey period.

Manufacturing production and new orders both fell for the second month running in July, with rates of contraction gathering pace. International trade volumes, meanwhile, declined to the greatest extent since April 2009.

Job losses were reported for the first time November 2009. With demand still weak and a sharp drop in backlogs suggesting spare capacity is still available, staffing levels could fall further in coming months.

Job creation at US manufacturers eased to a two-and-ahalf year low. Meanwhile, staffing levels in the
Eurozone and China fell at the steepest rates since January 2010 and March 2009 respectively. Payroll numbers rose only moderately in Japan, the UK and India, but increased sharply in Canada and Mexico.

Cost pressures fell further in July. The rate of average input price deflation accelerated to a 38-month peak. Costs fell in the vast majority of nations. Notable exceptions were the steep increases reported by Denmark, India, Indonesia, Mexico and Russia.

David Hensley, Director of Global Economics Coordination at JPMorgan, said: “Weak demand and the ongoing period of inventory adjustment pushed the global manufacturing sector into deeper contraction at the start of Q3 2012. Job losses were also recorded for the first time in over two-and-a-half years. Recent cost reductions are providing some respite, but this will be of little long-term benefit if underlying demand fails to pick up.”


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