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Global manufacturing PMI at 53.5 in January from 53.8 in
December
Production growth remains strong but eases as exports come close
to stalling, led by renewed fall in China
Supply chain delays close to highest since 2004
Prices rise at steepest rate in nearly a decade
Global manufacturing remained encouragingly resilient in January
despite rising coronavirus disease 2019 (COVID-19) infection rates
and fresh lockdown measures in many countries, according to the
latest PMI survey data. Especially strong expansions continued to
be reported in the US, Germany and Asia excluding Japan and China,
notably in India and Taiwan.
However, export growth slowed close to stalling, dampening
production growth compared to prior months, with an especially
notable renewed fall in exports out of mainland China. Factories
worldwide meanwhile also reported that exports and purchasing
continued to be dogged by supply delays, which worsened further as
demand often outstripped supply and logistics delays caused
increased transportation issues. The resulting increase in supplier
pricing power and shipping surcharges caused input prices to rise
at the fastest rate for almost a decade, with prices charged by
factories also hitting a near ten-year high.
Production recovery continues in January
The JPMorgan Global Manufacturing PMI, compiled by IHS Markit
from its proprietary business surveys, edged lower from 53.8 in
December to 53.5 in January, indicating an improvement in business
conditions for a seventh successive month but at a slightly slower
rate than seen in November and December. The expansion was
nonetheless the third-strongest recorded for almost three
years.
While output and new orders rose at slightly slower rates, both
remained indicative of solid growth of production and demand for
goods. Official data, available up to November, have meanwhile
shown manufacturing output regain levels of a year ago,
underscoring the sector's swift recovery from the COVID-19 related
downturn in the first half of 2020.
Output rose in 19 economies covered by the IHS Markit PMI
surveys, but fell in 12. By comparison, only nine reported falling
output back in December. The steepest loss of output was seen in
Mexico, followed by Kazakhstan, Ireland and Malaysia. Some six
economies swung into decline, with Ireland seeing the biggest
turnaround, while three - Russia, the Philippines and Turkey - saw
renewed growth. The strongest gains were seen in India and the US,
both of which saw growth accelerate to near decade- and six-year
highs respectively, followed by Germany and Taiwan.
Other notable developments among the major economies was a
near-stalling of growth in the UK, where Brexit-related issues
exacerbated the impact of a third national lockdown, and a marked
slowing in China, where output showed the smallest rise since
April. Japan slipped into decline, linked in part to tighter
COVID-19 restrictions, but in contrast the rest of Asia saw the
fastest factory growth since April 2011.
Employment steady amid cautious optimism
Employment meanwhile grew marginally for a third successive
month, pointing to a welcome stabilisation of global factory
payroll numbers after 11 months of continual decline. The
turnaround in the job market in recent months not only reflects
rising capacity requirements (note that backlogs of uncompleted
work rose for a sixth straight month in January) but also in part
reflects upbeat prospects for the year ahead. The number of
optimists continued to exceed pessimists by a margin that has
rarely been exceeded in the past six years, albeit losing some
ground compared to November and December, in part reflecting
concerns in some countries regarding further waves of COVID-19
infections.
Jobs growth was led by the US followed by Italy and Brazil.
Spain and Germany meanwhile saw the steepest job losses among the
major economies.
Export growth stalls
An area of concern is export growth, which came close to
stalling after four months of expansion, suggesting that trade has
become less of a driving force for the global manufacturing
economy.
However, much of the weakening export performance could be
attributable to mainland China, where goods exports fell for the
first time since July, dropping at the sharpest rate since June.
China's export decline contrasted with surging exports in Germany,
Taiwan and the Netherlands, and more subdued but still notably
strong growth in the US and India. Excluding China, global export
growth even picked up a little speed in January, showing the
second-steepest rise in 32 months and presenting a more encouraging
picture of global trade flows.
Supply worsens
The drop in exports from China was concentrated in the
intermediate and investment goods sectors, hinting that other
countries may see weakened imports of such goods from China. It is
not yet clear why China's exports have fallen, though anecdotal
evidence collected from survey participants reported widespread
shipping container shortages, virus related restrictions and a
larger than usual Chinese New Year effect.
The drop in exports from China may add to existing supply
issues, which have risen dramatically in recent months.
Global supply delays grew more widespread in January, the
incidence of longer delivery times rising to a level rarely
exceeded in the survey's 23-year history. With the exception of the
supply delays seen at the height of the pandemic in March and
April, and the supply issues created by the Fukushima incident in
2011, the incidence of delays in December was the highest since
2004.
Lead times for inputs lengthened in all countries surveyed with
the exception of Thailand. Companies commonly reported a lack of
shipping capacity, including a shortage of containers, and
frequently reported bottlenecks as suppliers and logistics firms
struggled to meet rising demand from manufacturers.
The highest incidence of delays was seen in the UK, linked to
wider supply chain problems being exacerbated by Brexit-related
shipping and transport delays after the end of the UK's transition
period for leaving the EU expired on 31st December.
Prices rise at fastest rate in nearly ten
years
A consequence of supply shortages was further upward pressure on
prices. Manufacturers' average input prices rose globally in
January at the fastest pace since May 2011. Prices have now risen
at an increasing rate over the past seven months, having fallen
briefly between April and May amid the slump in demand caused by
pandemic-related shutdowns. Price hikes were mainly attributed to
increased pricing power among suppliers and shipping
surcharges.
Higher costs were frequently passed on to customers in the form
of higher prices. Average prices charged at the factory gate rose
worldwide at the joint-steepest rate since May 2011.
Chris Williamson, Chief Business Economist, IHS
Markit
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.
