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Worldwide manufacturing output growth slowed in October to the
weakest so far in the recovery from the initial pandemic lockdowns,
constrained by record supply delays which resulted in one of the
steepest price increases seen in over two decades of survey
history. While signs of output reviving in parts of Asia provide
encouragement that the global supply situation may start to
improve, manufacturers' optimism about the year ahead has dipped to
a one-year low amid concerns over persistent supply chain
bottleneck, inflation and a near-stalling of global trade.
We review the latest PMI data with 10 key charts.
Chart 1: Global output growth at 16-month
low
Global manufacturing output growth slowed in October to the
lowest recorded since the recovery from the initial pandemic
lockdowns began in July of last year. The JPMorgan Manufacturing
PMI Output Index, which measures monthly production changes, fell
from 52.1 in September to 51.6, to signal a further cooling of the
worldwide manufacturing expansion from July's recent peak, when the
index hit 55.7 - its highest for over a decade.
Chart 2: Production shortfall against demand at 16-year
high
Although October also saw manufacturing new orders growth weaken
to the second lowest in just over a year, the slowing of production
growth was even steeper. Manufacturing output consequently lagged
behind growth of new orders to the greatest extent recorded during
an expansion since 2004, resulting in yet another large rise in
backlogs of uncompleted work globally during October.
Chart 3: Record supply constraints
This shortfall of production could be to a large extent
explained by ongoing supply constraints, in part relating to labour
but more widely for raw materials. Suppliers' delivery times
lengthened globally at a rate unprecedented over almost a quarter
of a century of survey history, with the rate of deterioration
accelerating markedly during the month.
Supply delays were associated with a number of causes, ranging
from suppliers lacking production capacity to shortages of shipping
and container availability and port congestion.
Chart 4: Supply delays universal, but focused on North
America and Europe
Every economy covered by IHS Markit's surveys saw longer lead
times in October, with the highest incidence of delays recorded by
countries located in North America and Europe. Far fewer delays
were reported across Asia, though even in Asia the average
lengthening of lead times was the greatest since the first
lockdowns of early 2020.
Chart 5: Near-record input price rise
A consequence of the ongoing supply crisis was yet another surge
in prices. The global PMI manufacturing input prices index rose to
a it's third highest on in October (behind only June and July
2008), indicating that, excluding the oil price spike in the summer
of 2008, the recent price pressures have greatly exceeded anything
seen in the survey's prior 23-year history.
Chart 6: Eurozone producers see steepest cost
increase
All economies reported higher input costs (with the vast
majority reporting higher rates of inflation), but the steepest
increases were seen in the eurozone, led by Greece, Austria,
Germany and the Netherlands, followed by the UK and US.
Chart 7: Record factory gate price
inflation
Higher costs fed through to higher prices. Globally, the rate of
inflation of goods sold at the factory gate hit a survey high in
October, with new records witnessed in the US, UK and Eurozone.
Rates of inflation also rose markedly in Japan, China and South
East Asia.
Chart 8: US and Europe see sharply slower output
growth
The concentration of supply delays in North America and Europe
meant these economies also saw especially weaker production growth
during October. A 15-month low was seen for production growth in
the US while the Eurozone and UK recorded the weakest expansions
for 16 months and eight months, respectively.
Chart 9: South East Asia revives from Delta
wave
However, while the US and Europe slowed, it was a different
story in South East Asia, where production rebounded from recent
restrictions associated with the spread of the COVID-19 Delta
wave.
Leading the Asian rebound was Indonesia, which recorded the
steepest rise in output in just over 10 years of survey history,
followed by India, where growth hit a seven-month high. These
economies have now recorded growth for two and four successive
months respectively after rising infections caused production
losses in prior months.
Thailand also reported a survey-record production gain as the
recovery gained traction for a second month. Both Vietnam and
Malaysia meanwhile saw production return to growth after multiple
months of falling output linked to COVID-19.
The reviving expansion seen in South East Asia meant Asia
ex-Japan and China as a whole reported the strongest output
increase since April. Having lagged the rest of the world with
output declining in August, the region is now recording stronger
growth than Europe and North America.
However, disrupted production meanwhile remained a feature of
manufacturing in mainland China, where output fell for a third
month running. But there was better news out of Japan, which joined
the broader Asian recovery by returning to growth after September's
decline.
Chart 10: Future expectations wane as trade flows
stall
The revival of production in South East Asia adds to hopes that
some of the pressure on global supply chains will ease in coming
months, as exports from these countries find their way to factories
in the west. The concern, however, is that shipping remains highly
congested, with a lack of containers and port capacity representing
particular bottlenecks. These bottlenecks were linked to a drop in
global export growth to a near stand-still in October, suggesting
that global trade is growing at its slowest rate since January.
This combination of stalling trade and persistent bottlenecks,
combined with rising prices, pushed manufacturing sentiment about
the outlook to its lowest for a year in October, suggesting that
producers are bracing themselves for tough times to come in the
near-term at least.
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.
