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Developed Nations Push Global Manufacturing Growth To 7-Month High

Posted By Paul Tate, November 03, 2015 at 12:52 PM, in Category: Manufacturing Leadership Community

World_Map_Illuminated.jpgWhile growth across the global manufacturing sector remained in comparatively low gear during October, some notable increases in activity in developed nations helped to push the headline JP Morgan/Markit Global Manufacturing Purchasing Managers’ Index (PMI) up from 50.7 in September, to a seven-month high of 51.4 last month.

A PMI figure over 50 marks expansion; a figure under 50 signifies industrial contraction.

“The developed world once again led the manufacturing upturn, as emerging markets remained in recession for a seventh successive month,“ noted the report.

Sub indices for global manufacturing output and new orders also showed faster expansion in October, while exports and employment switched back into growth after falling into contraction in previous months. 

In the U.S., stronger export growth and more robust domestic demand helped push the US into joint-second place with Italy in the global growth table, with the U.S. manufacturing sector PMI reaching a six-month high, up from 53.1 in September to 54.1. This pointed to the sharpest improvement in overall business conditions in U.S. manufacturing since April.

“Stronger manufacturing growth in October brings encouraging news after the sector saw the pace of expansion slump to a two-year low in the third quarter,”commented Chris Williamson, chief economist at Markit.

Across the Atlantic, the U.K. was the star performer last month with a PMI of 55.5 compared to 51.8 in September. Analysts Markit noted that this sudden 3.7-point improvement was one of the steepest monthly rises in the survey’s 24-year history and catapulted the U.K. to the top of the global growth charts for October.

“The ongoing strength of the [U.K.] domestic market and a welcome improvement in new export orders led to a broad-based upturn in production of consumer, intermediate and investment goods,” commented Markit’s senior economist, Rob Dobson. “The revival of overseas sales is a particularly encouraging aspect of the latest survey, helping to dispel fears that global demand is slumping and boding well for the outlook.”

Though overall Eurozone gains where less impressive, the 18-nation region’s PMI ticked up to 52.3 from its 52.0 level in September when it hit a five-month low. Italy and the Netherlands saw the greatest gains, while Germany dipped to a 3-month low at 52.1, and Spanish manufacturing activity slumped to a 22-month low at 51.3. Greece was the only nation continuing to record worsening contraction with a 5-month low of 47.3.

In Asia, most countries did not fare so well. China’s manufacturing sector remained in contraction with a PMI of only 48.3 in October. Operating conditions for Chinese manufacturers have now worsened in each of the last eight months. Nevertheless, the latest figures are an improvement over the 47.2 level in September, prompting some suggestions from industry observers that China’s manufacturing recession may be bottoming out.

“The slight upswing shows the [Chinese] manufacturing industry’s overall weakening has slowed down, indicating that previous stimulating measures have begun to take effect,” noted Dr. He Fan, chief economist at Caixin Insight Group.

India, meanwhile, saw growth rates slow to a 22-month low of 50.7; Taiwan saw a slight reduction in the rate of contraction with a PMI up to 47.8 last month, although this is still a long way from achieving real growth; and South Korea saw conditions deteriorate as the rate of contraction dipped from 49.2 to 49.1 in October. Nevertheless, this was still higher than Korea’s average performance over the last eight months. Downturns were also recorded in Indonesia, Malaysia, and Turkey.

Japan, however, saw the best growth rates for a year, with a PMI up from 51.0 in September, to 52.4 last month, indicating a marked improvement in operating conditions for Japanese manufacturers.

In South America, meanwhile, Brazil’s manufacturing sector is still in a critical condition with its PMI at a 79-month low of only 44.1 for October, a further significant slide from its 47.0 level in September.

Mexico’s manufacturing sector, however, helped by continued foreign investment from U.S.-based companies adopting near-shoring strategies, saw its PMI rise from 52.1 in September to 53.0 last month. It also recorded the steepest rise in manufacturing output for the last five months.

So, as manufacturers around the world continue to seek growth through the fourth quarter of the year, there are clearly some areas of improvement still to be addressed, especially in Asia. But with the help of more robust expansion rates in many developed nations, the overall prospects for the global manufacturing sector look healthier than they have for a while. 

It will be interesting to see if the world’s developed nations can continue to support increasing global growth as we approach year-end. 

Written by Paul Tate

Paul Tate is Research Director and Executive Editor with Frost & Sullivan's Manufacturing Leadership Council. He also directs the Manufacturing Leadership Council's Board of Governors, the Council's annual Critical Issues Agenda, and the Manufacturing Leadership Research Panel. Follow us on Twitter: @MfgExecutive

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