Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Global manufacturing PMI signals softer contraction of output
in May
Only China reports growth but downturns ease in all other
countries except Japan and Australia
Global demand and trade continue to fall sharply, underscoring
concerns for growth in coming months
Global manufacturing output fell for a fourth successive months
in May, albeit with the rate of decline easing compared to April.
The past two months have nevertheless seen the steepest
back-to-back drop in production since the first quarter of
2009.
Manufacturing performance was affected by COVID-19 lockdowns.
Only China reported output growth, reflecting earlier lifting of
containment measures, while Italy saw the mildest downturn.
While the further easing of lockdown measures should help
producers around the world, weak global demand hints that
recoveries could be frustratingly subdued in the months ahead.
Output drops substantially in May, but rate of decline
slows
The output index from the JPMorgan Global Manufacturing PMI survey,
compiled by IHS Markit from its proprietary business surveys, rose
from 32.5 in March to 39.2 in May. By remaining well below 50, the
index pointed to a further steep decline in production during the
month. However, the higher index reading indicated a cooling in the
rate of contraction to the slowest since March.
The average index reading over the past two months nevertheless
hints that worldwide manufacturing output will fall steeply in the
second quarter, dropping at a similar rate to that seen at the
height of the global financial crisis in the opening months of
2009.
While April saw many major countries continue with COVID-19
lockdowns which commenced in March and led to many non-essential
businesses closing temporarily, May saw some gradual reopening of
factories as lockdown measures were eased, which has helped to
moderate the overall rate of decline.
Supplier delivery delays also moderated to the lowest since
February, allowing more firms to ensure sufficient quantities of
inputs could be purchased to support production.
Only China reports higher output
However, despite the rate of decline easing, the factory
downturn remained broad-based. Of the 31 countries for which IHS
Markit collects manufacturing PMI data, only China reported any
output growth in May, although all bar Japan and Australia reported
slower rates of contraction.
The outperformance of China is especially notable given its
output gain in May was the steepest since January 2011, primarily
reflecting more companies returning to fuller production after
COVID-19 closures and domestic demand showing signs of
stabilising.
Italy, which like China locked down relatively early, reported
the softest drop in production. The steepest downturn was meanwhile
recorded in Indonesia followed by India, the latter seeing a
particularly aggressive lockdown during the month of May.
A comparison of PMI output data against IHS Markit's COVID-19
containment index (which uses a score of 0-100 to gauge the degree
of lockdown measures, with 0 being no restraints) highlights how
PMI scores have generally been related to degrees of lockdown.
Looking at non-seasonally adjusted data we can gain an even
clearer insight into month-on-month changes in COVID-19 impact.
Here the performance of China is even more marked. The output index
for China rebounded strongly from 18.0 in February to 61.5 in March
as the lockdown was eased, averaging 55.7 in April and May.
Similarly, Italy's non-seasonally adjusted output index rose
from a record low of 11.8 in April to 51.8 in May, also signalling
a return to growth before usual seasonal influences are taken into
account, again reflecting Italy's earlier lifting of lockdown
measures.
In contrast, the unadjusted output indices for countries such as
the US, UK, Spain and Germany - where lockdowns continued to be
more widely felt in May, have merely see rates of decline moderate,
rather than a return to growth.
Recoveries stymied by lack of demand
The stronger data for China and Italy hint that PMIs for other
countries will lift higher as lockdowns continue to ease and
companies are able to restart their operations.
However, there is a concern that once production has shown an
initial rebound due to factories reopening, the dominant factor
driving production in future months will be demand, which is
currently continuing to fall despite lockdowns easing.
The return to work at many factories was often countered by
other companies reporting that the production trend had continued
to deteriorate often due to a further weakening of order books.
Inflows of new business fell globally for a fourth consecutive
month in May, with the rate of decline easing compared with April
but nonetheless the second-steepest since February 2009.
Global export orders showed an even sharper deterioration than
overall order books, highlighting how weakened international trade
flows continued to act as a severe drag on manufacturing activity,
even in China, where the latest drop in new export orders was still
among the steepest recorded since the height of the global
financial crisis.
Barring April's record fall, only one month in the PMI survey
history - December 2008 - has seen a steeper collapse in global
exports than that registered in May.
Employment falls amid quickest drop in backlogs of work
for 11 years
The further slump in orders from both domestic and export
customers meant backlogs of work - a key gauge of the amount of
work-in-hand at manufacturing companies - fell at an increased rate
globally in May. The fall in backlogs was the sharpest recorded
since April 2009 and highlights the extent to which excess capacity
has built up at companies since the pandemic first struck, which is
likely to limit production growth in coming months unless demand
revives markedly.
As a result, there were reports of widespread job losses as
companies reduced operating capacity in line with lower production
needs. Although softer than that seen in April, May's drop in
employment was the second-quickest since June 2009.
Business expectations offer glimmer of hope
On a more positive note, the May survey did see a modest return
to optimism for the year ahead, adding to evidence that the worst
of the downturn is behind us. The number of optimists exceeded
pessimists in May, with pessimists having been in the majority in
April for the first time since comparable data were available in
2012. However, the overall degree of positive sentiment was weaker
than at any time prior to the pandemic.
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.
