A.SREENIVASA REDDY (ABU DHABI)
The global manufacturing sector stabilised after a prolonged period of contraction, as the Purchasing Managers’ Index (PMI) rose from 49.4 to 50.0.
The improvement indicates that the sector is moving from contraction to a neutral phase, with the possibility of entering a growth period. The J.P. Morgan Global Manufacturing PMI, compiled by J.P. Morgan and S&P Global Market Intelligence, highlighted this development as significant, given the sector's earlier struggles.
PMI serves as a crucial economic barometer, offering insights into the performance of manufacturing and services industries. It is derived from surveys of purchasing managers, capturing metrics like new orders, production, and employment levels. A PMI above 50 signals expansion, while a reading below 50 indicates contraction, and a PMI of 50 represents no change.
Countries and regions across the world showed varied progress in the manufacturing sector. Mainland China reported improved business conditions with a five-month high PMI reading of 51.5, and the rest of Asia too followed suit, where the PMI rose to 51.1 on average. This contrasted with a deepening downturn in the eurozone, where PMI sank to 45.2. Conditions came close to stabilising in the United States, where PMI was at a five-month high of 49.7.
The S&P Global report revealed that three of the five PMI sub-indices signalled expansion in November. Output increased for the second consecutive month, marking the best performance since June, although growth remained modest. The rise in consumer and intermediate goods production had offset declines in investment goods. Incoming new business also rose for the first time in five months, but international trade flows remained weak, with new export orders contracting for the sixth straight month.
Export gains were limited to eight countries in November. India saw the strongest growth, followed closely by Spain, which bucked the broader trade malaise in the eurozone. Strong export gains were also seen in Taiwan, South Korea, and Russia.
Mainland China showed an improvement in export performance, whereas the United States and Japan lagged. European economies faced challenges, with France recording the steepest decline in exports.
Manufacturing employment declined for the fourth successive month in November, the PMI report said. Staffing levels were reduced in the euro area, China, Japan, and the UK, whereas the US, India, and Brazil were among the nations that registered job growth. Input buying volumes across the global manufacturing sector increased for the first time since June, but stocks of both finished goods and raw materials declined, the report revealed.
Business confidence reached a six-month high, with optimism across consumer, intermediate, and investment goods industries. However, price pressures began to mount as input costs and selling prices registered mild inflation. Supply chain disruptions continued, with vendor performance deteriorating for the sixth consecutive month.
Overall, stabilising the PMI at 50.0 provides hope for a turnaround in global manufacturing, supported by improving domestic demand and gradual output growth.