Posted By Paul Tate, February 04, 2014 at 5:44 AM, in Category: Manufacturing Leadership Community
While manufacturing growth dipped in some nations during January, including the U.S., overall global industrial expansion remained strong for the start of 2014.
Still ahead of the 50 threshold that marks the difference between growth and expansion, the U.S. manufacturing Purchasing Managers’ Index (PMI) slumped to 51.3 last month, down from 56.5 in December, according to the latest figures from the Institute of Supply Management (ISM).
Many observers believe the particularly harsh, cold weather during January in many U.S. manufacturing heartlands had a significant impact on the results. PMI calculations have also been revised by the ISM this month to reflect seasonal factors. As the arctic freeze eases, it will be interesting to track U.S. performance in February to determine if the sudden dip in manufacturing activity is a sign of a longer-term trend.
Across the Atlantic meanwhile, January saw continued improvement in Europe’s factory fortunes. The 18-nation Eurozone manufacturing PMI rose strongly to 54 last month, up from 52.7 in December and the fastest growth rate since May 2011. New orders also expanded at the fastest pace for three years. Manufacturing employment across the region also moved into growth after two years of contraction – up from 49.9 in December to 51.0 last month.
In national terms, Germany’s manufacturing PMI figure led the Euro-pack with a 32-month high of 56.5; Spain hit a 45-month high of 52.2; France finally seems to be closing the gap to growth after months of contraction with a PMI just under the 50 mark at 49.3; and even financially-strapped Greece flipped into growth last month for the first time since 2009, with a PMI of 51.2.
Outside the Eurozone, the UK continued to top the global growth table with a strong manufacturing PMI of 56.7 in January, although growth seems to have stabilized following the high of 57.2 in December. “Although the pace of output expansion has cooled slightly in recent months, growth is still tracking at one of the highest rates in the 22-year survey history,” commented Rob Dobson, senior economist at Markit.
BRIC nations fared less well in January. Brazil remained just over the growth threshold with a marginally improved PMI of 50.8; Russia’s PMI dropped to a 55-month low of 48.0; and China’s PMI dipped back into contraction at 49.5 in January, compared to 50.5 at the end of 2013. Chinese manufacturing employment also fell for the third month with the steepest reduction in jobs since March 2009.
India’s manufacturing sector, however, finally saw mild improvements in both domestic and overseas orders during January, helping to push India’s manufacturing PMI up to 51.4 last month from 50.7 in December, according to the latest HSBC/Markit results. Though still in the low 50s, this figure suggests that India’s factory sector expanded at its fastest pace since March 2013.
By far the brightest star in Asia last month was Japan. After suffering badly from both economic and natural upheaval in recent years, Japan’s PMI shot up to 56.6 in January, the highest level of growth for eight years. Factory output increased at the sharpest pace for over 12 years, and new orders rose faster than they have since February 2006.
Overall, the composite J.P. Morgan Global Manufacturing PMI remained solid in January, recording only a slight dip from 53.0 in December to 52.9 last month, clearly indicating that much of the world’s manufacturing industry has started 2014 on a solid growth footing and remains optimistic about the months ahead.
“The global manufacturing sector maintained its solid growth momentum at the start of the year, with production and new orders expanding at rates above their respective averages for the current recovery," observed David Hensley, director of global economics coordination at J.P. Morgan. "Manufacturers are also still adding to payrolls, a positive bellwether that they expect the current upturn to run further."
What are your expectations for the months ahead? Was the lower U.S. PMI last month just an aberration caused by the polar vortex, or is it a more worrying sign of a longer-term slowdown? And as America sneezes, will the rest of the world catch a cold over the winter or will the global manufacturing sector continue to grow regardless?
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