The latest data from Markit show a global economy that remains stalled, even with improvements in some areas. In the United States, the Flash Manufacturing Purchasing Managers’ Index (PMI) increased slightly from 51.1 in September to 51.3 in October. This suggests very slow growth in manufacturing activity in the U.S., with improvements masking the fact that these indicators reflect considerable weaknesses.
The various components of the index reflect mixed news. The index for output rose from 50.6 to 51.5, with similar upticks in employment and inventories. On the other hand, the pace of new orders eased slightly, down from 52.3 to 51.6.
New export orders were virtually unchanged in contraction territory, up from 48.0 to 48.1. Indeed, slowing sales have been the main driver of growth or decline in many of these types of sentiment surveys in recent months, and with weak economies around the world, export sales have generally been lower. Meanwhile, pricing pressures have picked up which is consistent with other surveys, with the index of input prices rising from 52.8 to 57.6.
Across the Atlantic, the Europe’s economic woes deepen. The Flash Eurozone Manufacturing PMI dropped from 46.1 in September to 45.3 in October. This brings it back essentially to where the PMI was in August, when it was at 45.1. Steep falls in new orders continue to be the problem, although the rate of decline appears to have eased somewhat from last month.
While the challenges are continent-wide, Markit says that the worst “performance was again seen outside of France and Germany.” Employers in Europe reduced employment overall, especially in the manufacturing sector.
On a more positive note, the Chinese economy has made some progress in the past month, even as it remains in contraction. The Flash China Manufacturing PMI rose from 47.9 in September to 49.1 in October, near the level seen in July, when it was 49.3. This is being framed as progress, particularly improvements in new orders, exports, and output. Yet, to be clear, each of these indicators remains below 50 – the threshold for expansion in the sector and the pace of declines in hiring appears to have picked up. This suggests that the Chinese economy continues to be weak, with larger headwinds having an impact even as the October readings show some stabilization.
Over the course of the next week, we will get further detail on country-by-country breakdowns in Europe, Asia, and elsewhere. Look for this to be summarized in the November edition of the NAM’s new Global Manufacturing Economic Update.
Chad Moutray is chief economist, National Association of Manufacturers.