Global Manufacturing Falls To A 32 Month Low

Global Manufacturing Falls - Weak Markit Manufacturing PMI

The Markit manufacturing PMI was 53 in February which fell from 54.9 in January. This is the slowest rate of manufacturing growth since August 2017. 

Inflation eased, but the rate of output and new order growth slowed. This report supports most other manufacturing metrics which show manufacturing growth slowed sharply in February. This shouldn’t be a surprise because the global economy is weakening.

Global manufacturing PMI fell slightly from 50.8 to 50.6 which is a 32 month low. The worst decline in the global PMI was the future output index which went from 60.7 to 59.2. 

As you can see from the chart below, slightly more than half of the countries in the index have either expanding or stable manufacturing PMIs. This is very close to the bottom in early 2015. More weakness would bring this percentage near the low of 2012. Also, this supports Ned Davis Research’s claim that the global economy is in a recession.

(Click on image to enlarge)

Getting back to the American PMI, the output increase was the softest since September 2017. Growth in new manufacturing business was the weakest since June 2017. Cost inflation fell to an 18 month low. The 1-year outlook for output fell to the 2nd lowest level since November 2016.

Capacity constraints aren’t as big of an issue. The overall index was hurt by tariffs, the trade war, and political uncertainty. The trade war between America and China is winding down, which should help this sector later this year. 

We will see how powerful the cyclical weakness is when the tariffs are gone, and free trade is expanded. The global economy could do a 180-degree turn, but the turn wouldn’t be exclusive because of changes to trade policies.

Global Manufacturing Falls - Weak ISM PMI

Compared to other measurements of manufacturing, the February ISM PMI was strong, but compared to recent ISM data, the report was very weak. 

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