Manufacturing Growth Slowing
Resource Hotspot 295
June Purchasing Manager Indices (PMIs) have been released and are generally indicating continued growth for the manufacturing sector (i.e. readings above 50), albeit at a more moderate rate. This is consistent with broader market indicators, with investor sentiment easing due to concerns that Europe and the U.S. could return to recession and that the pace of economic activity in China will be constrained.
It is unsurprising that growth rates in the manufacturing sector are slowing, with the first half of 2010 having been supported by a major restocking phase as the world recovered from the GFC – and this process has now run its course.
However, overall we believe the data suggests that Western world demand remains solid and the moderation of growth in China is at a reasonable level.
| Headline PMI by Area |
US | Eurozone | Japan | China |
|---|---|---|---|---|
| Jan-08 | 50.7 | 52.8 | 52.3 | 53.2 |
| Feb-08 | 48.3 | 52.3 | 50.8 | 52.8 |
| Mar-08 | 48.6 | 52.0 | 49.5 | 54.4 |
| Apr-08 | 48.6 | 50.7 | 48.6 | 55.4 |
| May-08 | 49.6 | 50.6 | 47.7 | 54.7 |
| Jun-08 | 50.2 | 49.2 | 46.5 | 53.3 |
| Jul-08 | 49.5 | 47.4 | 47.0 | 53.3 |
| Aug-08 | 49.3 | 47.6 | 46.9 | 49.2 |
| Sep-08 | 43.4 | 45.0 | 44.3 | 47.7 |
| Oct-08 | 38.7 | 41.1 | 42.2 | 45.2 |
| Nov-08 | 36.6 | 35.6 | 36.7 | 38.8 |
| Dec-08 | 32.9 | 33.9 | 30.8 | 41.2 |
| Jan-09 | 35.6 | 34.4 | 29.6 | 45.3 |
| Feb-09 | 35.8 | 33.5 | 31.6 | 49.0 |
| Mar-09 | 36.3 | 33.9 | 33.8 | 52.4 |
| Apr-09 | 40.1 | 36.8 | 41.4 | 53.5 |
| May-09 | 42.8 | 40.7 | 46.6 | 53.1 |
| Jun-09 | 44.8 | 42.6 | 48.2 | 53.2 |
| Jul-09 | 48.9 | 46.2 | 50.4 | 53.3 |
| Aug-09 | 52.9 | 48.2 | 53.6 | 54.0 |
| Sep-09 | 52.6 | 49.3 | 54.5 | 54.3 |
| Oct-09 | 55.7 | 50.7 | 54.3 | 55.2 |
| Nov-09 | 53.6 | 51.2 | 52.3 | 55.2 |
| Dec-09 | 54.9 | 51.6 | 53.8 | 56.6 |
| Jan-10 | 58.4 | 52.4 | 52.5 | 55.8 |
| Feb-10 | 56.8 | 54.2 | 52.5 | 52.0 |
| Mar-10 | 59.6 | 56.6 | 52.4 | 55.1 |
| Apr-10 | 60.4 | 57.6 | 53.5 | 55.7 |
| May-10 | 59.7 | 55.8 | 54.7 | 53.9 |
| Jun-10 | 56.2 | 55.6 | 53.9 | 52.1 |
The China PMI has displayed the most significant signs of weakness, suggesting the pace of manufacturing growth continues to soften as the government attempts to reign in property speculation. The uncertainty is whether activity elsewhere in the economy will offset this factor.
In the U.S. the prospects for growth have taken hits in the most recent housing market and employment data. However, with a headline index of 56.2 manufacturing activity should still be at a very healthy level.
In the Eurozone the data is surprisingly stable given the austerity measures being proposed in response to sovereign debt issues.
