Manufacturing activity accelerated in November to its fastest pace since March, according to the latest Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) data. Flash data give us an advance estimate of manufacturing activity incorporating “approximately 85% of the usual monthly survey replies,” with the final PMI data released on December 2. The overall composite measure was up from 51.8 in October to 54.3 in November.
Behind these data, there were significant increases in new orders (up from 51.6 to 54.9), exports (up from 50.7 to 52.6), and output (up from 49.5 to 57.1). This suggests that the sector has begun to recover from softness in the spring and summer months, with the production levels at the highest point since February. With that said, manufacturers continue to be more hesitant about adding new employees, with the hiring index edging slightly lower from 52.3 to 52.2. The good news was that the sector is adding workers on net, but with only modest gains.
Meanwhile, we continue to see stabilization in the Chinese and European economies even as weaknesses persist. The HSBC Flash Eurozone Manufacturing PMI moved up marginally from 51.3 to 51.5. This is further proof that Europe has begun to move beyond its deep recession, with PMI values in expansion territory for the fifth consecutive month. Prior to that, Eurozone manufacturing activity had contracted for 23 straight months. Still, it should be said that real GDP rose just 0.1 percent in the third quarter, suggesting that the turnaround in Europe is only barely beginning.
The underlying statistics for European manufacturing activity were somewhat mixed. New orders (up from 52.1 to 52.3) and export sales (up from 53.0 to 54.0) were higher, but output was essentially unchanged (down from 52.9 to 52.8). In addition, hiring continues to be a challenge, even as the pace of the decline slowed in November (up from 48.7 to 49.1). Moreover, the pace of growth has varied from country to country, with German manufacturing accelerating (up from 51.7 to 52.5) but French production falling further into contraction territory (down from 49.0 to 47.2).
Elsewhere, the pace of the expansion eased a bit in China, with the HSBC Flash China Manufacturing PMI declining from 50.9 to 50.4. Despite the slower figure, it was the fourth straight month with the PMI above the key threshold of 50 – the level at which manufacturing activity is expanding on net. As such, the Chinese economy continues to improve from softness seen in the spring and summer. The output data support this, with production rising to its fastest pace since March (up from 51.0 to 51.3).
Nonetheless, overall activity was up only modestly, and several of the other key measures had a slower rate of growth for the month. For instance, the pace of new orders eased (down from 51.6 to 51.0), with exports declining (down from 50.8 to 49.4). Net hiring returned was also negative (down from 49.9 to 49.5).
Even with the softer data, Hongbin Qu, HSBC’s Chief Economist for China and the Co-Head of its Asian Economic Research division, added, “The muted inflationary pressures should enable Beijing to keep policy relatively accommodative to support growth.” In fact, it is hard to be too hard on China, as overall growth has been picking up in general. Industrial production rose from a 10.2 percent year-over-year pace in September to 10.3 percent in October.
Chad Moutray is the chief economist, National Association of Manufacturers.
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