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.
Although global manufacturing output growth ran at one of the
fastest rates seen for over a decade in June, capacity constraints
continued to develop, reflecting a lack of labour and a record
worsening of supplier delivery times. Prices continued to rise
sharply as a result.
The survey data also reveal a widening disparity between strong
growth in the developed world and a near-stalling of output in the
emerging markets; a divergence which can be largely attributed to
differing vaccination rates and further waves of COVID-19. Steep
downturns in several key Asian economies could pose a further
threat to global supply chains in coming months.
Factory output still running close to 11-year
high
The JPMorgan Global Manufacturing PMI, compiled by IHS Markit
from its proprietary business surveys, registered another strong
rise in factory output during June, rounding off the best quarterly
expansion for a decade.
The upturn was largely attributed to surging demand as many
economies around the world continued to open up from COVID-19
related lockdowns and restrictions, while rising vaccination rates
also lifted sentiment and demand among businesses and consumers
alike, notably in Europe and the US.
Shortages limit production growth
However, the survey data also show that new orders rose even
faster than output for a fourth month running in June, indicating
that demand over the past two months is running ahead of production
to a degree not witnessed since 2009 with the exception of February
last year .
Looking at the anecdotal evidence provided by companies
contributing to the PMI surveys, this 'production shortfall' could
be principally attributed to capacity constraints, both in terms of
staffing and component supplies.
The scale of staff shortages was reflected in global growth of
employment running behind order book growth to one of the greatest
extents for 11 years in June. The shortfall of payroll numbers to
new orders was especially acute in the developed markets.
Rising shortages of inputs were meanwhile reflected in an
unprecedented lengthening of suppliers' delivery times in June.
While the PMI survey do not track the effect of demand running
ahead of supply for labour via wage growth, it does monitor raw
material prices. Average prices paid by manufacturers for their
inputs continued to rise at one of the fastest rates for a decade
in June, due principally to this sellers' market environment.
Asian growth hit by further virus waves
A factor exacerbating the recent deterioration of global supply
chains has been the renewed damaging effect from COVID-19 on
manufacturing performance in many countries that are battling
rising infection rates. While high vaccination progress is helping
to ensure production and demand are continuing to surge in the US
and Europe, a very different picture is emerging from countries
which have low vaccination rates and rising case numbers.
Especially strong declines were recorded in Malaysia and Vietnam
during June, with a renewed output drop also reported in India.
Production in the Philippines declined for a third successive month
and Thailand's output fell for a second month. Marked slowdowns
were meanwhile seen in Taiwan, Indonesia and Japan, while factory
output in China grew at its slowest rate since March of last
year.
In all cases, the PMI survey responses highlighted how
production was being adversely affected by fresh measures adopted
to tackle rising virus case numbers, either in domestic or export
markets.
Emerging markets lag developed world
It is not just Asia which is seeing renewed weakness of
manufacturing performance, however, with output in Russia coming
close to stagnation again in June as rising virus numbers disrupted
the economy, and a further steep fall in output was recorded in
Mexico.
As a result, while developed world production continued to grow
at a rate close to decade-highs in June, emerging market output
growth came close to stalling, its lowest since June 2020.
Excluding the factory shutdowns seen in China early last year,
the emerging markets as a whole are consequently underperforming
the developed markets to a degree unprecedented since comparable
PMI data were available over a decade ago.
This divergence underscores the vital role that vaccination
progress has in allowing economies to return to growth, but it is
also a reminder that supply chain delays may persist for some time.
Asian supply of exported goods and components in particular is
clearly continuing to be heavily disrupted, which is in turn likely
to mean price pressures remain more persistent than would otherwise
be the case.
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.
