The Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) edged slightly lower, down from 54.7 in November to 54.4 in December. 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 January 2. The bottom line was that growth in U.S. manufacturing activity was decent overall, picking up from weaknesses earlier in the year.
For instance, output growth rose at its fastest pace in November since March 2012, and the December data were only barely below that rate. (The output index was down from 57.4 in November to 57.3 in December.) Still, growth in new orders decelerated a bit for the month (down from 56.2 to 54.5). Export sales remained up modestly (unchanged at 51.4). This suggested that the slower pace of new orders stemmed from an easing in domestic demand.
One piece of good news for the U.S. was a slight uptick in the pace of hiring (up from 52.3 to 53.7). It was the sixth consecutive month of positive gains in employment in the Markit PMI survey data. This corresponds to the more-positive manufacturing jobs numbers over the past few months.
Meanwhile, we continue to see stabilization in the Chinese and European economies. For example, the HSBC Flash Eurozone Manufacturing PMI rose from 51.6 in November to 52.7 in December. This was the highest point for the PMI since May 2011. The underlying data were mostly higher, as well, including new orders (up from 52.3 to 54.2) and output (up from 53.1 to 54.8). Employment growth moved to almost neutral (up from 48.8 to 49.9), suggesting that the declining in hiring might be close to turning around.
The pace of growth has varied from country to country, with German manufacturing accelerating (up from 52.7 to 54.2) but French production falling further into contraction territory (down from 48.0 to 45.3).
Nonetheless, there do continue to be weaknesses in Europe – a sign that the continent has not fully recovered from its two-year recession. As noted in the most recent Global Manufacturing Economic Update, real GDP growth in the third quarter was far from robust, up just 0.1 percent. Eurozone industrial production declined 1.1 percent in October, as well, even as the year-over-year pace was marginally positive, up 0.2 percent.
Elsewhere, the HSBC Flash China Manufacturing PMI decreased from 50.8 to 50.5. Even with the lower PMI figure, the key finding was that Chinese manufacturing activity has now expanded – albeit very modestly – for five straight months. The subcomponents of the report were somewhat mixed. On the positive side, the index for new orders (up from 51.7 to 51.8) rose to its highest level since March. Yet, production growth slowed a little (down from 52.2 to 51.8), and hiring remained negative (down from 48.9 to 48.8). The employment measure has been below 50 in eight of the past nine months.
In general, we have seen the Chinese economy pick up in the past few months. Real GDP has accelerated from an annualized 7.5 percent in the second quarter to 7.8 percent in the third quarter, and industrial production has averaged 10.2 percent at the annual rate over the past four months (August to November). Prior to that, the pace of production had slowed to annualized 8.9 percent growth rate in June.
Chad Moutray is the chief economist, National Association of Manufacturers.
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