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 output fell for a sixth successive month in
January, according to the JPMorgan Global Manufacturing Purchasing
Managers' Index™ (PMI™) compiled by S&P Global, but the rate of
decline showed welcome signs of moderating for a second successive
month.
Encouraging signals were also sent via a cooling in the rate of
loss of order books and a marked improvement in business confidence
about prospects for the year ahead. Sentiment was buoyed in
particular by the news of China relaxing its COVID-19 containment
measures.
Producers nevertheless remained cautious about the outlook,
keeping staffing levels largely unchanged and continuing to focus
on inventory reduction policies in order to manage overheads,
underscoring how the business environment remains challenging and
that a resumption of robust growth is by no means assured.
Global factory output downturn moderates
The global manufacturing downturn showed signs of easing at the
start of 2023, according to the latest PMI surveys compiled by
S&P Global. At 49.1, the JPMorgan Global Manufacturing PMI
remained below the 50.0 threshold which separates contraction from
expansion, but by rising from 48.7 in December, the PMI registered
a moderating rate of deterioration.
Moreover, the PMI survey's Output Index, which acts as an
especially reliable advance indicator of actual worldwide factory
production trends, signalled a second successive month of slower
decline, moving up to its highest since last August to add to signs
that the global manufacturing downturn peaked in November.
Any pockets of growth were largely confined to Asia, with
Thailand, India and the Philippines leading the pack in January and
with Indonesia also enjoying a solid expansion while Myanmar
reported a small uptick. However, modest growth was also seen in
Russia, Italy, Canada and the Netherlands.
Although, some of the steepest downturns were also recorded in
Asia, with Taiwan leading the global contraction and Malaysia and
Vietnam both also reporting especially steep contractions. Asia
excluding mainland China and Japan was again the only major trading
block to report manufacturing growth in January.
Encouragingly, however, downturns eased in the other major
economies, including in the US, Eurozone, UK, Japan and mainland
China to add to signs that the worst of the current manufacturing
weakness has passed.
Future expectations hit 10-month high
Further evidence of a turning point was provided by the survey's
subindices. In particular, new orders fell at the slowest rate
since last August, reflecting a cooling of the pace at which demand
for manufactured goods is falling.
However, even more encouraging was a third successive monthly
improvement in business optimism about the year ahead. Confidence
is consequently now running at its highest since March of last
year.
Key to other improvement in business expectations about the year
ahead was the reopening of China's economy. Not only did the
removal of COIVID-19 restrictions lift optimism in the Chinese
mainland's manufacturing sector to the highest since April 2021,
but the surveys saw widespread reports of the re-opening of the
Chinese economy to have lifted growth expectations in many other
economies, including helping expectations hit an 11-month high in
the eurozone, an eight-month high in the US, and a three-month high
in Japan. Interestingly, sentiment slipped slightly in the rest of
Asia, in part reflecting expectations of some possible loss of
export business as trade from China revives.
Ongoing caution
Despite the slower rate of loss of new orders and improvement in
business optimism, January saw signs of continued caution from
manufacturers worldwide, notably in respect to a further steep drop
in purchasing of inputs, ongoing inventory reduction policies, and
a sustained reluctance to hire workers.
Any material change in this cautious stance observed across
manufacturing will require demand conditions to further improve.
While China's reopening is likely to provide a welcome boost to
demand, reviving demand also needs to be seen in the developed
world, notably in the US and Eurozone which, so far, remains
subdued.
Chris Williamson, Chief Business Economist, S&P
Global Market Intelligence
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.
