The global manufacturing slowdown has begun
The global manufacturing industry PMI activity survey, compiled by JP Morgan and S&P Global, was little changed month-on-month, rising to 52.4 from 52.3. Data for both months points to 20-month lows. Manufacturing, one of the sub-items of the PMI index, has been contracting for 2 months. The manufacturing sub-index was 48.7 and 49.6 in April and May, respectively.
Survey, War in Ukraine, Strain on Supply Chains, Recent Shutdowns and Shutdowns in China; and ultimately rising cost pressures are responsible for the downturn. While consumer goods production accelerated and A/A rose in May, capital and intermediate goods continued to decelerate. Chinese manufacturing industry has been stagnant for 3 months.
The decline in total order quantity is almost over. However, export orders fell sharply from 48.3 to 47.9. Business expectations have also deteriorated. The rate of those expecting production to increase fell from 61.8% to 60.7%.
Input and output inflation is strong, but the rate of inflation is slowing. The input cost index fell to 70.5 from A/A 71.6. The producer price index, on the other hand, fell to 61.5 from 63.8, showing that industrialists had difficulty passing on their input costs to consumers.
JP Morgan global economist Olya Borichevska assessed the survey results as follows: Although the decline in the manufacturing sub-index has slowed, the only reason is China. Monthly production in China rose 4.7 points. Outside China, production fell 0.7 points monthly. China still hasn’t made up for half of the production lost during the Omicron epidemic. Despite this, supply chain issues are still a big concern, but we are seeing bottlenecks easing.
Global manufacturing data points to stagflation rather than recession. The headline index has found equilibrium from a very distant level in the recession. Although the rate of inflation is slowing, the pace is still very high. In the coming months, manufacturing output will slowly stabilize and price increases are likely to affect the global economy at least until the end of the year, even if supply chain issues are resolved.
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