Recovery slackening around the world
Manufacturing looks a lot weaker after today’s Purchasing Managers’ Index results. For the last eighteen months, manufacturing (and especially manufacturing exports) have been the only bright element in the economic picture, but the UK Manufacturing PMI published by Markit Economic Research is not at all hopeful. Markit says the Index has seen a “steep deterioration” since the period of strong growth earlier in the year.
The Index is based on monthly reports from purchasing managers – the people responsible for buying in the materials and goods and services a company needs, so they’re the first to tell whether business is growing or slowing down. Figures for new orders provide one component of the Index, and this is particularly gloomy as it fell for the second month running; Markit say this reflects:
“an ongoing weakness of domestic demand, but also a worrying near-stagnation of new export orders.”
The new orders results give a feel for what the near future looks like, so it doesn’t seem likely that this is just a blip. Taken with the rather poor results for Business Investment earlier this week, this is all quite depressing.
The economic commentators are rather divided on how the evaluate the picture. Howard Archer, of IHS Global Insight described the index as “a hugely disappointing survey which fuels currently mounting concerns over the economy.” On the other hand, the Engineering Employers’ Federation sees the glass as half full:
“Behind the headline the figure the detail shows production, export orders and employment all still edging up, albeit at a more subdued pace than earlier in the year.”
But the EEF points out that, “with spending cuts now kicking in it is clear that any support to growth from the domestic market is likely to be minimal, which leaves UK manufacturers exposed to events in the global economy.”
And here other results from Markit today are particularly worrying, because the manufacturing PMIs for other major markets are just as depressing. In Brazil, there was an “overall deterioration in business conditions in June”; in Eurozone manufacturing there is a “broad-based slowdown”, with growth at an 18 month low; Chinese manufacturing output fell for the first time since July 2010 and Russian manufacturing growth is “sluggish.” Looking at the bigger picture, Markit’s Global Manufacturing PMI fell to it’s lowest for 23 months…
It doesn’t look as though manufacturing exports are going to be enough to save us from inadequate domestic demand, at least for a while yet.