Aug 2023 PMI data hints at slower contraction in global manufacturing

August saw manufacturing production decline for the third successive month, as contractions in the intermediate and investment goods sub-industries more than offset mild growth in the consumer goods category. National PMI data signalled that the euro area remained a weak spot, with output contracting at a marked pace. Mainland China returned to growth, the US fell back into decline and the downturn in Japan continued, JP Morgan and S&P Global said in a joint press release.

Underlying the latest scaling back of global manufacturing production was a decrease in new orders. New business fell for the 14th month running, albeit at the slowest pace since May. The euro area, US, and Japan—all saw new work intakes contract, in contrast to a modest increase, in mainland China. International trade flows declined, extending the current sequence of contraction to one-and-a-half years.

The ongoing downturn in new order intakes led to a further depletion of work-in-hand (but not yet completed) at factories. Backlogs of work declined for the 14th month running and at a similar pace to May, June, and July.

Job creation continued nonetheless, with employment rising for the second month running. That said, the rate of growth remained modest, as rising workforce numbers in mainland China, the US, and Japan (among others) were partly offset by cuts in other regions including the euro area and the UK.

August PMI data provided further evidence that manufacturers are responding to the weaker economic backdrop by operating on a leaner footing. Purchasing activity, stocks of inputs, and holdings of finished goods were all reduced during the latest survey month. Lower demand for raw materials also eased the pressure on supply chains, leading to a shortening of vendor lead times for the seventh month in a row.

Input costs and output charges increased during August, after both price measures had signalled decreases in each of the prior three months. Renewed cost inflationary pressure was mainly building in emerging markets—where purchase prices increased (on average)—in contrast to a further decrease among developed nations.

The outlook for the manufacturing sector remained subdued in August. Alongside declining order intakes, business optimism dipped to its joint-lowest level during the past nine months and the new orders-to-finished goods inventory ratio remained at a level signalling mild contraction.

The JP Morgan Global Manufacturing PMI is a composite index produced by JP Morgan and S&P Global in association with ISM and IFPSM.

Fibre2Fashion News Desk (NB)