Global Manufacturing PMI at 38-month Low in August

Michelle Remo, “Big 4″ observer
September 07, 2012 /

The global manufacturing downturn gathered pace in August, with rates of contraction in output and new orders
accelerating to the fastest since mid-2009.

David Hensley, Director of Global Economics Coordination at JPMorgan, said: “The August PMIs point to a further modest acceleration in the rate of contraction of global industry, as the sector is buffeted by rising headwinds in a number of key economic regions and falling levels of international trade. The labour
market is still holding up better than the activity indicators, but this could be threatened as signs of excess capacity become more visible.”

At 48.1 in August, down slightly from 48.4 in July, the JPMorgan Global Manufacturing PMI remained below the neutral 50.0 markthat separates expansion from contraction for the third consecutive month. The headline index currently stands at its lowest level since June 2009.

Manufacturing production fell at the fastest pace for 39 months in August, reflecting declining levels of new business and weaker international trade flows. Spare capacity also remained available at manufacturers, as highlighted by the steepest depletion of backlogs of work for almost threeand-a-half years.

ISM data indicated that US manufacturing production contracted for the first time since May 2009. Conditions
also remained weak in Europe, with output falling sharply in the Eurozone and a modest decline also signalled for the UK. The Czech Republic and Poland also saw slight reductions in production. In Asia, contractions were reported for China, Japan, South Korea, Taiwan and Vietnam.

Brighter spots were provided by the expansions seen in Canada, India, Indonesia, Ireland, Mexico, Russia, South Africa and Turkey.

The level of new export business contracted for the fourth straight month in August. Although the pace of decline eased slightly since July, the trend in new export business was still weak in comparison to its long-run trend. The US, Asia and Europe all reported declining volumes of new export business.

August saw global manufacturing employment decline for the second successive month, following a 31-month period of sustained job creation. Marginal losses were reported in both developed and emerging nations.

Manufacturers continued to report reductions in average input prices during August. Costs have now fallen for three successive months. However, the rate of input price deflation eased sharply since July. This mainly reflected the higher costs of oil and associated by-products.


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