Global Manufacturing Mixed Results

  • China PMI expands at highest pace since 2011
  • Eurozone manufacturing flat from July to August
  • India economy contracts most on record in Q2

China's manufacturing sector expanded at a solid pace in August, according to a private survey. We continue to see improvement in Britain and the rest of Europe, but concerns about the sustainability of the upturn are emerging. PMI surveys gauge the growth in activity from the previous month, so while we are seeing a pick up now after lockdowns are lifted, employment numbers suggest the outlook is hazy.

The Caixin China General Manufacturing PMI rose for the fourth consecutive month from 52.8 in July to 53.1 in August, the highest reading since January 2011. Manufacturers registered the first increase in new export sales since December 2019 as demand started to pick up overseas, and employment was stuck in negative territory for the eighth consecutive month but moved closer to stabilization. The Caixin results beat analyst expectations and also contrasted with the official government PMI data, which also showed expansion but at a slower pace.

PMI china
Source: Caixin.

U.K. manufacturing production rose at the fastest pace since May 2014. PMI at 55.2 in August, up from 53.3 in July. However, experts warn it may not be time to celebrate just yet. "The drop in job numbers in August makes this feel more of a rebalancing strategy than real recovery," warned Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply. "Companies are looking at how to stay in business for the rest of the year as challenges from the pandemic retreat a little only to be replaced by an imminent Brexit."

Eurozone manufacturing PMI was at 51.7 in August, flat from July. Divergent trends in manufacturing performance were observed with Italy, Ireland, the Netherlands and Germany seeing sharp growth, stagnation in Spain and France and deterioration in Greece. Like Britain, job losses continued. "Manufacturing is currently being buoyed by a wave of pent up demand, but capacity is being scaled back. The next few months’ data will be all important in assessing the sustainability of the upturn," said Chris Williamson, Chief Business Economist at IHS Markit.

PMI
Source: IHS Markit.

India's manufacturing PMI rose above 50, signaling growth for the first time in five months in August as lockdown measures lifted. The economy shrank 23.9% year over year in Q2, according to official GDP figures, making it the worst affected major economy.

We also got other official eurozone data today. Consumer prices (the inflation rate) fell -0.2% in August while analysts were expecting a gain, which is likely setting deflation alarm bells off at the ECB. Unemployment reached 7.9% in July, up from 7.7% the previous month.