Key findings

• Global manufacturing upturn stalls as production stagnates and new orders contract
• Price inflation and supply chain pressures show further signs of easing
• Business optimism falls to 26-month low

 
The global manufacturing sector started the third quarter on a weak footing, as output stagnated and new order intakes contracted. International trade flows continued to retrench, while the pace of job creation near-stalled. The darkening economic backdrop also hit business confidence, with optimism dipping to its lowest level since May 2020.

The J.P.Morgan Global Manufacturing PMI™ – a composite index produced by J.P.Morgan and S&P Global in association with ISM and IFPSM – fell to a two-year low of 51.1 in July, down from 52.2 in June. The headline PMI, which is calculated as a weighted average of five sub-indices including output and new orders, stayed above the neutral 50.0 mark due to gains in stocks of purchases, employment and longer vendor lead times (albeit to lesser extents than June for the latter two).

Please note that due to later release dates, data for Canada and Ireland were not available for inclusion in the July numbers.

Manufacturing output stagnated in July, following a brief return to growth in June. Rates of expansion slowed in both the consumer and investment goods industries. Intermediate goods producers saw output contract for the third time in four months.

National PMI data indicated that the stalling of the upturn was largely due to weakness in developed nations, where production volumes contracted (on average) for the second month running and to the greatest extent since June 2020. Output declined in the US, the euro area, Japan and the UK.

Emerging markets saw output rise for the second month running in July. The rate of growth slowed, however, mainly reflecting a fading of the strong positive impact of an easing of lockdown restrictions in China during June. The performances among emerging nations were also more mixed than for developed nations. While upturns continued in China, India and Brazil, contractions were seen in nations such as Russia, Poland, Mexico and Turkey.

New business decreased for the first time since June 2020. National PMI data painted a similar picture for trends in new orders to that for output, with developed nations seeing a contraction (on average) compared to a mild upturn across emerging nations (led mainly by China, India and Brazil). New work intakes declined in the intermediate and investment goods industries and stagnated in the consumer goods category. New export business contracted for the fifth month running and at a faster pace.

The deteriorating economic backdrop was also reflected in jobs growth and business confidence. Although employment rose for the twenty-first consecutive month, the rate of increase was among the weakest during that sequence. Staffing levels continued to rise in the US, the euro area and
Japan, but were lowered in China. Positive sentiment among global manufacturers meanwhile dipped to its lowest level since May 2020.

July saw rates of input cost and output charge inflation both ease to 17-month lows. Increases signalled for both price measures remained substantially higher (on average) in developed nations compared to emerging markets. In a further sign that supply chain pressures were passed their peak, the rate of lengthening in vendor lead times was the weakest since November 2020. Purchasing activity, stocks of purchases and finished goods inventories all rose during the month.