The global manufacturing PMI (Purchasing Managers’ Index) fell to a 26-month low of 50.3 in August 2022, down from 51.1 in July and only slightly above the 50.0 no change mark, according to a report by investment bank JP Morgan and business intelligence firm S&P Global. New order intakes declined for the second successive month, while a reduction in backlogs of work combined with rising stocks of finished goods point to a possible build-up of excess capacity at factories.

The JP Morgan Global Manufacturing PMI is a composite index produced by JP Morgan and S&P Global in association with ISM (Institute for Supply Management) and IFPSM (International Federation of Purchasing and Supply Management).

The global manufacturing PMI fell to a 26-month low of 50.3 in August 2022, down from 51.1 in July and only slightly above the 50.0 no change mark. New order intakes declined for the second successive month, while a reduction in backlogs of work combined with rising stocks of finished goods point to a possible build-up of excess capacity at factories.

Global manufacturing production contracted in August. Apart from the China lockdown-related falls earlier in the year, this is the first downturn since June 2020 (during the early stages of the COVID pandemic). Output declined across the consumer, intermediate, and investment goods industries.

Only ten out of the 30 nations for which August data were available registered increases in production, the majority of which only saw marginal growth (including China, Brazil, Spain, and Australia). The US, the euro area, Japan, and the UK were among the larger economies to see contractions. August data signalled a further softening of global demand for manufactured products, with the level of new orders decreasing for the second consecutive month

International trade flows also retrenched further, with the volume of new export business down for the sixth month in a row. Only two of the nations covered – India and Australia – saw foreign demand improve during the latest survey month. There were signs that excess capacity may be building in the global manufacturing sector. August saw the second successive month where stocks of finished goods rose, and backlogs of work contracted.

Subsequently, the rate of jobs growth remained only marginal, matching July’s one-and-a half year low. Staffing levels were raised in the US, the euro area and Japan (among others), while China was one of the 11 nations to see a decrease. Rates of input cost and output price inflation eased further during August. The increase in purchasing costs was the least marked since the end of 2020.

However, cost pressures remained elevated, with reports of supply chain difficulties, raw material shortages, and elevated prices for key inputs such as energy and electronics. Average output charges rose at the slowest pace for one-and-a-half years. Business optimism edged upwards during August, rising to a three-month high and recovering from July’s 26-month low, added the report.

Confidence strengthened to a six-month high in emerging markets (on average) and hit a three-month peak among developed nations. However, despite firms’ positive outlook for the year ahead, the near-term horizon remained negative. The cyclically sensitive new orders to inventories of finished goods ratio fell to 0.95 – its lowest level since May 2020 (during the early stages of the COVID pandemic).

Global manufacturing PMI indices are compiled by S&P Global from responses to monthly questionnaires sent to purchasing managers in survey panels in over 40 countries, totalling around 13,500 companies. These countries account for 98 per cent of global manufacturing value added.

Fibre2Fashion News Desk (NB)