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Global manufacturing PMI unchanged at 33-month high of 53.8
seen in November
Production growth eases only slightly from near-decade high in
November, led by Germany, Brazil and India
Supply chain delays increase to levels rarely seen over past
two decades, pushing prices higher
Optimism remains close to five-year highs
Global factory output and order book inflows continued to rise
at some of the fastest rates seen over the past decade in December,
according to the latest PMI survey data, indicating a further
recovery from the coronavirus disease 2019 (COVID-19) related
downturn seen in the first half of the year. The production upturn
was led by Germany, followed by Brazil and India.
However, supply delays have also risen sharply to an extent only
exceeded on very rare occasions over the past 25 years, as demand
outstripped supply and logistics delays intensified. Input prices
have also risen at the sharpest rate for nearly two and a half
years as a result of these shortages. More encouragingly, business
confidence about the year ahead remained buoyant, albeit losing
some ground on November amid rising concerns over escalating virus
case numbers in some markets. Employment was held steady as the
building of new capacity in some firms was offset by caution in
relation to expansion in other firms.
Production growth holds close to
decade-high
The JPMorgan Global Manufacturing PMI, compiled by IHS Markit
from its proprietary business surveys, came in at 53.8 in December,
unchanged on November's 33-month high. However, two important
components of the PMI - output and new orders indices - both fell
slightly from November, as did the employment component, offsetting
positive contributions from longer delivery times and a reduction
in the rate of destocking.
Having accelerated in November to the fastest since February
2011, global factory production growth moderated slightly in
December but the latest expansion remained one of the strongest
seen over the past decade. The December increase meant output rose
continually over the final six months of 2020, having contracted
sharply between February and June. The survey data are broadly
consistent with output growing at an annualised rate of
approximately 5%.
Note that the latest available official data suggest that global
production was running 3.3% below the level of a year ago in
September, which compares well with a peak annual rate of decline
of 17.8% seen in April.
Germany heads up global expansion
Having led the global production upturn for two consecutive
months up to November, Brazil was pushed into second place in the
global rankings by Germany, followed by India. In all three cases,
growth rates moderated but remained among the highest seen over the
past decade.
The US was the fifth-placed fastest-growing manufacturing
economy, behind Taiwan, also seeing growth wane but remain the
second-fastest in over five years. Canada likewise saw robust
growth, benefitting from rising demand from the US, with output
growing at the sharpest rate for over two years.
Above average global growth was also seen in the UK, Ireland and
the Netherlands, but these expansions in part reflected a temporary
boost from pre-Brexit stockpiling.
Falling output was meanwhile seen in just seven of the 29
economies for which PMI data are so far available for December,
with Mexico and Greece again reporting the steepest declines.
Japan was noteworthy in seeing its output stabilise, having
contracted continually since the end of 2018. China was also
noteworthy in recording output growth that remained close to
decade-highs.
Output in Asia excluding Japan and China meanwhile grew at a
slightly reduced rate compared to October and November, but the
expansion was nonetheless the third strongest since April 2011.
Trade revives but remains subdued by virus
outbreak
A key contributor to the relatively swift return of robust
global manufacturing growth in the recent months has been a revival
in worldwide goods trade.
Whereas it took eight months for the global PMI's new export
orders index to show a return to growth after bottoming out at the
peak of the global financial crisis, 2020 saw exports return to
growth after just five months after the low point seen in April.
However, global new export orders growth slowed in December, often
linked to intensifying supply chain delays.
Supply delays worsen
While there were some reports of demand having weakened amid
resurgent waves of COVID-19 infections in many parts of the world,
notably Europe, output, demand and trade flows were in many cases
also constrained by rising supply problems.
With the exception of the supply delays seen at the height of
the pandemic in March and April, and the supply issues crated by
the Fukishima incident in 2011, the incidence of delays in December
was the highest since 2004. Lead times for inputs lengthened in all
countries surveyed. The highest incidence of delays was seen in
Brazil, followed by the UK, Germany, Australia and the US, though
the biggest increase in the number of delays was recorded in
Taiwan.
Companies commonly reported issues with a lack of shipping
capacity around the world, including a shortage of containers, and
frequently reported bottlenecks as suppliers and logistics firms
struggled to meet rising demand from manufacturers.
Prices rise at fastest rate in two and a half
years
A consequence of supply shortages was higher prices.
Manufacturers' average input prices rose in December at the fastest
pace since July 2018. Prices have now risen at an ever-increasing
rate over the past seven months, haven fallen briefly between April
and May amid the slump in demand caused by pandemic-related
shutdowns. Often price hikes were simply attributed to increased
pricing power among suppliers, but there were also many reports of
shipping surcharges.
Optimism sustained by vaccine hopes
Manufacturers' optimism about the year ahead meanwhile waned
slightly in December, but remained close to the near-five-year high
seen in November. Sentiment continued to be buoyed by news of
COVID-19 vaccine roll-outs, and has remained especially upbeat in
the US following the Presidential Election result, though December
saw some increased concerns about the near-term impact of rising
virus cases.
Employment stable at year-end
The sustained buoyancy of future output expectations, further
robust order book growth in December and shortages of operating
capacity (as indicated by rising backlogs of work) all contributed
to higher workforce numbers at some firms in December, though many
other firms remained either reticent to hire amid the ongoing
pandemic or even cut headcounts in order to minimise costs. The net
result was no overall change in worldwide staffing levels after a
marginal gain in November, though this represents a welcome
improvement on the continual drop in employment seen over the prior
11 months.
Looking at the major economies, jobs growth was again led by
recovering factory headcounts in Canada and the US, as well as in
Turkey, Brazil and Australia, followed by a number of European
economies. Interestingly, Germany - which reported the strongest
output growth in December - also reported one of the steepest falls
in employment, behind only the Philippines and Mexico. Job losses
were also reported in Indonesia, Thailand, India, Greece, Russia,
Spain, the UK, Austria, Malaysia and China, the latter reporting a
small decline after strong job gain in November.
Chris Williamson, Chief Business Economist, IHS
Markit
Tel: +44 207 260 2329
chris.williamson@ihsmarkit.com
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.