The Global Manufacturing Contraction Eases Again In June

Germany

Germany's manufacturing sector shrank for the 11th month in a row in May, but the severity of the contraction was the least marked for any month since October, and the PMI at 40.9 was up from 39.6 last month, and better than the flash reading of 40.5. This still represents a very strong contraction, however, and Germany has a long road ahead before it returns to expansion.

France

The decline in French manufacturing activity also eased in June, although firms reported they continued to slash jobs at a rapid pace. The final Markit/CDAF manufacturing purchasing managers' index rose for the fourth straight month in June, hitting 45.9 compared to 43.3 in May. Much better than Germany, but not as good as the UK. UK industry is evidently benefiting from the devaluation effect at this point.

Spain

One of the great mysteries for people in Spain is why the German economy seems to be doing even more badly than theirs is. In this sense June was not a disappointment, since the Spanish PMI, which rose to 42.8 from 39.8 in May, the highest reading since May 2008 and well off December's record low of 28.5, also was above Germany's 40.9, and Germany has no housing bust.

Ireland

Irish manufacturing PMI data for June pointed to another sharp deterioration of operating conditions. However, the rates of decline of output, new orders and employment all eased over the month. The seasonally adjusted NCB PMI rose to 42.5 in June, from 39.4. Although the sector continued to deteriorate at a considerable pace at the end of the second quarter, June's contraction was the slowest since last September. Even so this was the sixteenth month in a row that output at Irish manufacturers has decreased.

June's fall was driven by fragile demand (particularly from domestic sources) and the negative impact of this on new orders. New export business decreased at a weaker pace than overall new orders, although the reduction was still solid. The relative strength of the euro against sterling made new orders from the UK harder to secure, according to the report.

Greece

Greece's seasonally adjusted Markit Manufacturing PMI came in at 47.7 in June, up from 46.1 in May, the PMI rose further from March’s record low to its highest position since October 2008. Employment, however, fell for the fourteenth successive month, by far the most sustained period of workforce reduction in the survey history.

Eastern Europe

In Eastern Europe, the Polish manufacturing PMI rose slightly to 43.0 in June, from 42.5 in May. This is still quite a weak performance for an economy which, in theory, is holding up rather well, and was below consensus expectations for a rise to 43.2. Still, the PMI was at its highest level since October 2008.

Czech Republic

The Czech PMI also inched up to a nine-month high in June but still registered its 12th straight month of decline. The reading rose to 41.9 from 40.5 in May and a record low in January. The Czech economy shrunk by 3.4% in the first quarter from the previous three months but the PMI has now been for for five months in a row. May industrial output fell 21.7% y-o-y, and new orders fell 27.6%.

Hungary

Hungary's contraction is more or less moving sideways at the moment. The June PMI came in at 45.8 in June, a slight uptick from 45.4 in May. The output improvement is almost all due to the export sector. Hungary is in deep recession but June exports offer a slight positive sign. The government projects that GDP will contract this year by nearly 7% as Germany also contracts. Germany and central europe are in lockstep.

Russia

Russia’s manufacturing industry shrank last month at the slowest pace since September, and VTB’s Purchasing Managers’ Index advanced to 47.3 in June from 45.3 in May. Russia’s industrial production has now stabilized at between 15 percent and 17 percent below last year’s level, according to Prime Minister Vladimir Putin last month. The government currently expects an 8.5 percent GDP contraction this year.

Turkey

Well Turkey is the fourth in the 50+ growth group since PMI data surprised positively – reading 53.9 up from 51 in May. This result is good news for Turkey following yesterday’s very disappointing GDP numbers, which showed that the Turkish economy contracted by a whopping 13.8% y/y. The immediate future looks a bit more promising than Q1.

Asia

Japan

The pace of contraction in Japanese manufacturing activity slowed for a fifth straight month in June, a survey showed on Tuesday, as companies gradually recover from Japan's deepest postwar recession. The Nomura/JMMA Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 48.2 in June, the highest since 48.6 in April 2008, from 46.6 in May.

However, the figure remained below the 50 threshold that separates contraction from expansion for the 16th straight month. The current output component of the PMI index gained for the fifth straight month, to 50.6 from 47.9 in May, edging above the boom-or-bust line for the first time since February 2008. The index for new export orders rose to a seasonally adjusted 51.2 in June from 49.8 in May, also the fifth month of improvement. That also marked the first growth in export orders in almost a year and a half as global trade recovered from last year's sharp declines.

China

China's manufacturing expanded in June, adding to signs the world's third-largest economy is rebounding from the collapse in global trade, but few new jobs were created, according to both the Chinese PMI surveys. Brokerage CLSA Asia-Pacific Markets said its purchasing managers index rose to 51.8 from May's 51.2. The government-sanctioned China Federation of Logistics and Purchasing said its own PMI edged up slightly to 53.2 from May's 53.1.

India

Manufacturing activity in India slowed slightly in June but still expanded for a third straight month, reflecting strong local demand, according to the survey, even as exports showed some creeping signs of improvement. The Markit PMI fell back slightly - to 55.34 in June from May's 55.7, the highest in eight months. The Indian PMI hit a trough of 44.4 in December and has steadily risen since.

South Africa

South Africa’s industrial output continued to fall sharply, although the PMI gained for the second month in a row in June. The seasonally adjusted index increased to 37.9 from 37.3 in May, Kagiso Securities said in the statement released in Johannesburg today. The index has now been below 50 since May 2008.

Americas

United States

The U.S. manufacturing sector shrank once more in June, but again at a slower pace than in May.The Institute for Supply Management said its index of national factory activity edged up to 44.8 to in June from 42.8 in May. This was slightly above Reuters economists median expectation for a reading of 44.5. So we continue to improve, but the next 3 months will still be critical to confirm or otherwise the improvement.

Brazil

Well, just about to wind the day up on the PMIs now. Brazil is in and posted 48.1 in June. That was the highest reading for nine months, and means the Brazilian industrial sector is nudging its way back towards expansion. However, the index rose only 0.3 points from 47.8 in May, so the recovery rate which we have seen since the end of the first quarter stalled somewhat in June.

Methodological Note

The Global Report on Manufacturing is compiled by Markit Economics based on the results of surveys covering over 7,500 purchasing executives in 26 countries. Together these countries account for an estimated 83% of global manufacturing output. Questions are asked about real events and are not opinion based. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease.