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Global PMI slips to 51.5 in December, lowest since September
2016
Export orders fall for fourth month in a row; business optimism
lowest since at least 2012; hiring fades
Price pressures ease
Ten of 30 countries report deteriorating manufacturing
conditions
Global manufacturing growth fell to its weakest for over two
years at the end of 2018 as the number of countries reporting
deteriorating business conditions rose to one-in-three.
Weakened optimism about the year ahead and reduced growth of
orders books meanwhile bode ill for output in coming months, and
contributed to the weakest rate of job creation for over two
years.
Factory gate price inflation meanwhile cooled sharply,
reflecting the falling cost of oil and slower demand growth for
commodities.
Manufacturing PMI at 27-month low
The JPMorgan Global Manufacturing PMI, compiled by IHS Markit,
fell to a 27-month low of 51.5 in December, down from 52.0 in
November. The survey is indicative of worldwide goods production
growing at a modest annual rate of approximately 2%.
The PMI indicated a steady easing in the rate of expansion over
the course of 2018 as trade war worries in particular subdued
global trade. The December surveys showed global export orders
falling for a fourth straight month, dropping at the fastest rate
since May 2016. In contrast, exports had been growing at the
fastest rate for almost seven years at the beginning of 2018.
The reduction in export orders contributed to a deterioration in
overall order book growth to the lowest since August 2016,
suggesting the rate of expansion of production could weaken further
in January.
Companies have also scaled back their optimism for the year
ahead, with business expectations down to the lowest since
comparable data were first available in 2012.
Companies responded to the reduced growth of new work and
gloomier outlook by taking a more cautious approach to hiring.
Factory headcounts continued to increase in December, but to the
smallest extent for 25 months.
Widening downturn
Not only did the rate of global manufacturing expansion fade at
the end of 2018, but the number of countries reporting
deteriorating business conditions also increased. The number of
countries either expanding or stable has fallen from 97% in
late-2017 to just two-thirds in December 2018.
Ten of the 30 countries surveyed reported a sub-50 PMI reading
in December. By comparison, in November 2017 only one country
(Colombia) reported a deterioration of business conditions.
The worst performance was again seen in Turkey, but China,
France, Italy, the Czech Republic, Poland, Taiwan, Malaysia, South
Korea and Mexico all also reported sub-50 PMI readings.
Growth remained resilient in a number of countries, with the
Netherlands rising to the top of the PMI rankings, followed by
Ireland and the UK. However, the UK - and most likely its close
trading partners - benefitted from increased orders and stock
building as increasing numbers of companies and their customers
stepped up preparations for a potentially disruptive Brexit.
Price pressures cool further
Price pressures also moderated considerably at the end of 2018.
Average manufacturing input prices registered the smallest monthly
rise since July 2017, cooling further from last June's peak, while
prices charged at the factory gate registered the joint-smallest
rise for 27 months.
Selling prices fell across the emerging markets for the first
time since January 2016 and rose in the developed world at the
slowest pace since August 2017.
Lower oil prices again contributed to the slower growth of
costs, but December also saw signs of demand and supply coming more
into line, meaning suppliers often struggled to raise prices.
Chris Williamson, Chief Business Economist, IHS
Markit
Tel: +44 207 260 2329
chris.williamson@ihsmarkit.com
Posted 02 January 2019 by 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.
