Two-thirds of countries reduce manufacturing activity

Data from the leading indicators of the state of the global industry – Purchasing Managers’ Indices (PMI) – point to a further weakening in demand for global industrial products. Only a third of the countries for which J. P. Morgan and S&P Global calculate the average indicator showed an increase in activity, while in the euro area and in the United States indicators recorded a further weakening of demand, and in China the index indicates its growth, but it is slowing down. Such cooling has already been reflected in purchase prices. In Russia, however, the opposite trend is observed: against the backdrop of growing export orders, the costs of raw materials and components are also growing.

The value of the global PMI index in the industry in June fell to its lowest value over the past six months – 48.8 points against 49.6 points in May, while only ten of the 29 countries that are taken into account in the calculation of the average showed an increase in industrial activity, evidence data from J. P. Morgan and S&P Global. The indicator has remained below the 50-point mark (the one that separates the growth of business activity from its contraction) for the past ten months. At the same time, the volume of output increased from February to May – against the background of the lifting of restrictions in China, but in June it also began to decline. The decrease concerned primarily the production of intermediate and investment goods, while stagnation was noted in the consumer sector.

The decrease in the indicator was caused by weakening demand and a reduction in the number of new orders, especially export ones. Thus, a decrease in external demand was recorded in the United States, the euro area, Japan, South Korea and Brazil, in China its growth was insignificant. As a result, manufacturers also reduced the volume of purchases (to a minimum since January), stocks were also reduced, as were delays in order fulfillment. However, the cost of raw materials and components decreased for the second month in a row – in developed countries, this effect was more pronounced than in developing ones. Average prices for finished goods also decreased in May and June.

The weakest level of activity is shown by the PMI values ​​in the euro area countries: the indicator dropped sharply to the level of 43.4 points – this is the minimum for 37 months (in May, the indicator was 44.8 points). At the same time, prices for raw materials and components decreased at the fastest pace since July 2009. In the US, activity remains higher, but also continues to decline: in June, the figure was 46.3 against 48.4 points in May. The Chinese indicator, according to Caixin, also slowed down, although it remained in the growth zone: 50.5 points in June after 50.9 in May. The level of optimism in expectations of output dynamics, in turn, fell to a minimum since November: in the United States, the indicator was the lowest in half a year, in China – in eight months, in the euro area – in seven months (including France and Germany are expected to reduce output over the next 12 months). Against this background, analysts of investment banks in their reviews discuss the possibility that the trends developing in the global industry may be the first signs of a new global economic crisis.

The Russian PMI in the industry, despite the slowdown compared to May (52.6 points after 53.5), turned out to be one of the highest – only India and Thailand were higher in June (extension of activity was also observed in Indonesia, Kazakhstan, Greece, Turkey , Mexico, Philippines, China and Myanmar). At the same time, key trends in Russia diverge from global ones – demand was supported by new export orders, while purchases of raw materials and components were at a maximum in 15 years, which accelerated the growth of costs – it was the highest since April 2022, prices for finished products also showed the highest high growth per year.

Tatyana Edovina