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The S&P Global Sector PMI™ revealed that Automobiles &
Auto Parts sector output contracted worldwide for a second
successive month amid the sharpest reduction in new orders since
the COVID-19 pandemic and renewed supply disruptions linked to the
pandemic and Russia-Ukraine war. There were mixed trends by
regions, Europe and Asia were the hardest hit, with the latter
seeing output falling at a sharper rate in May. That said, a key
component of automobiles production - semiconductors - continued to
see its short supply situation show signs of easing in May,
according to PMI data, which may bode well for the wider autos
sector going forward.
Global Sector PMI shows auto sector output in
contraction in May
The S&P Global Sector PMI™ indices are compiled from
responses to questionnaires sent to purchasing managers in S&P
Global's PMI survey panels, covering over 27,000 private sector
companies in more than 40 countries. The Sector PMI tracks eight
broad sectors - Basic Materials, Consumer Goods, Consumer Services,
Financials, Healthcare, Industrials, Technology and
Telecommunication Services - and 21 sub-sectors on a monthly
basis.
The latest May survey signalled that while most categories saw
business activity improve in May, a number of sectors remained
under pressure amid weak demand, supply shortages and steep prices.
Many of these sectors were concentrated in the manufacturing
sector, with the likes of the Automobile & Auto Parts sector
ranking amongst the worst performers. May also marked the second
consecutive month in which the Automobiles & Auto Parts sector
saw output fall, dragging the headline PMI for the sector into
contraction territory for the first time since July 2020.
Asia auto sector output declines at a faster rate in
May
The rate at which the Global Automobile & Auto Parts sector
declined was the fastest since October 2021. Mixed trends were
observed across the continents tracked with the contraction of
Europe Automobile & Auto Parts sector output easing markedly
while Asia's Automobiles & Auto Parks output contraction
accelerated to the fastest pace since initial months of the
COVID-19 pandemic. The sector was also the worst performing in the
Asia region in May.
Automobile & Auto Parts sector PMI
output
A challenging supply chain situation continued to plague the
auto sector in May, with Greater China and surrounding regions,
including Japan and Korea, continuing to see production impacted by
COVID-19 lockdowns while the Russia-Ukraine conflict also played a
part (See "
May 2022 production forecast sees variations from region to
region", 16 May 2022). As such, it perhaps little surprise to
find Asia's production being the one to pose a drag on the overall
global picture.
Global consumer goods demand waver as spending shift
towards services
Leading to the poor Automobiles & Auto Parts sector output
performance had also been the weakness in demand recorded in May.
Automobiles & Auto Parts new orders fell at the fastest rate
since May 2020, which was at the heights of when the COVID-19
pandemic first broke out.
Automotive sector supply issues continue to outweigh
demand decline
Despite a deterioration in demand conditions for automobiles,
and correspondingly auto parts, it must be highlighted that
backlogged work continued to build in the Global Automobiles &
Auto Parts sector midway into the second quarter. The PMI's
Backlogs of Work Index has now indicated a fourth successive month
in which work outstanding rose, overlapping the two-month
contraction of new orders. In fact, the rate at which backlogged
work accumulated accelerated in May even as new orders fell
sharply, indicating more severe supply side bottlenecks.
Global Automobile & Auto Parts sector PMI
backlogs
Assessing the Suppliers' Delivery Times index, vendor
performance continued to deteriorate within the Global Automobiles
& Auto Parts sector. Even though the rate at which lead times
lengthened declined from April, it remained indicative of
widespread delays when compared to the survey history, and is
nowhere near the rate when things first recovered from the COVID-19
pandemic hit in 2020.
Global Automobile & Auto Parts sector PMI suppliers'
delivery times
Auto sector price pressures ease marginally in
May
As a result of the supply issues on hand, price pressures also
remained severe in May. That said, there had likewise been some
early signs of easings across both input costs and output price
inflation in May in the Global Automobiles & Auto Parts
sector.
By geography, Europe's Automobiles & Auto Parts sector saw
both input cost and output price inflation decline from the April
record rates. Input prices nevertheless rose at the sharpest pace
amongst the various European business sectors tracked for a second
month in a row. Over in Asia, price pressures also showed signs of
easing with input costs and output prices exhibiting much slower
rates of growth compared to their western counterpart.
Automobile & Auto Parts sector PMI price
indices
Semiconductor shortage broadly show further signs of
easing in May
Deep diving into the performance of semiconductor supply and
pricing situation, given the impact that this key component has on
automotive production, we find that semiconductor shortages showed
further signs of easing globally. This was according to our S&P
Global PMI™ Commodity Price and Supply Indicators which track the
development of price pressures and supply shortages each month for
at least 20 items using responses gathered from the S&P Global
Manufacturing PMI survey.
Global Commodity Price & Supply Pressures:
Semi-conductors
In turn for the Philadelphia semiconductor index (SOX index),
which we find the PMI gauges correlating with, there are
indications that further SOX declines may ensue. This was as the
semiconductor price pressure and supply shortages indices both
pulled lower in May to the lowest readings since early 2021.
Global semiconductor supply shortages and price
pressures vs. SOX index
Automotive sector outlook
Despite the Global Automobiles & Auto Parts PMI slipping
into contraction for the first time in almost two years, weighed by
the sharpest new orders contraction since the COVID-19 pandemic,
sentiment improved globally amongst auto and auto parts makers in
May. This was also the case in both Europe and even Asia despite
the onslaught of supply woes gripping the sector.
Automobile & Auto Parts sector PMI future
output
It is perhaps with little doubt that uncertainties persist both
on the demand and supply side amid a slowdown in global growth
expected and with the Ukraine war and mainland China's COVID-19
disruptions persisting. That said, the green shoots seen here from
improving business confidence amongst auto and auto parts makers to
easing semiconductor industry constrains may offer some semblance
of hope for improvements moving forward.
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
