Daily Spotlight

Global Manufacturing Starting to Stir

Purchasing managers (representing manufacturing sectors) have delivered mostly negative outlooks for several months, due in part to rampant inflation, supply-chain woes, the Russian invasion of Ukraine, and higher interest rates. In fact, most manufacturing sectors are contracting, but we note that the several key economies may have bounced off a trough or are nearing a turnaround. A case in point is China, which had a Purchasing Managers Index reading of 49.5 in 4Q22 and is now in positive territory at 52.6% (as a reading above 50% indicates an expanding manufacturing segment). Manufacturing stalwart Germany's most-recent PMI reading was 46.3, but surveys noted that supply-chain pressures were easing and delivery times were improving. In the UK, the latest PMI reading was 49.3% versus 47.3% in the prior quarter. Japan is an outlier in this trend, having recently reported a PMI of 47.4, indicating that manufacturing is shrinking at the fastest pace in over two years. The U.S. is not much better, having reported a February PMI reading of 47.8%, up from 47.4% in the prior month. Yet other domestic industrial indicators remain mostly positive. Total manufacturing new orders rose 1.8% month-over-month in December, and are 8% higher year-over-year. Nondefense capital goods excluding aircraft were slightly lower month-over-month in December, but have risen 6% year-over-year; meanwhile durable goods orders jumped 5.5% month-over-month in December to $287 billion. Capacity utilization is running at 78.3%, above the 20-year average of 76.8%. Still, these are historical growth rates. The PMI data continues to point to a difficult environment for U.S. manufacturing. ...  at 52.6% (as a reading above 50% indicates an expanding manufacturing segment). Manufacturing stalwart Germany's most-recent PMI reading was 46.3, but surveys noted that supply-chain pressures were easing and delivery times were improving. In the UK, the latest PMI reading was 49.3% versus 47.3% in the prior quarter. Japan is an outlier in this trend, having recently reported a PMI of 47.4, indicating that manufacturing is shrinking at the fastest pace in over two years. The U.S. is not much better, having reported a February PMI reading of 47.8%, up from 47.4% in the prior month. Yet other domestic industrial indicators remain mostly positive. Total manufacturing new orders rose 1.8% month-over-month in December, and are 8% higher year-over-year. Nondefense capital goods excluding aircraft were slightly lower month-over-month in December, but have risen 6% year-over-year; meanwhile durable goods orders jumped 5.5% month-over-month in December to $287 billion. Capacity utilization is running at 78.3%, above the 20-year average of 76.8%. Still, these are historical growth rates. The PMI data continues to point to a difficult environment for U.S. manufacturing.   more

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