The global manufacturing sector experienced a significant setback at the start of the second half of 2024 as July saw output expand at the weakest rate in the current seven-month sequence of increases.
The JP Morgan Global Manufacturing PMI – a composite index produced by J.P.Morgan and S&P Global Market Intelligence in association with ISM and IFPSM – posted 49.7 in July, down from 50.8 in June and below the neutral 50.0 mark separating expansion from contraction for the first time in 2024 so far.
Two out of the five PMI components (new orders and stocks of purchases) were consistent with a deterioration in operating conditions, employment signalled no change, and the trend in output had a much less positive effect than in recent months.
Although vendor lead times lengthened, this was mainly due to supply-chain disruptions as opposed to improving demand for raw materials.
The slowdown reflected weaker expansions in the US and China, an ongoing downturn in the euro area, and a fall back into contraction in Japan.
Declining new order intakes were also a major factor underlying the weaker expansion, as new business fell for the first time since January.
Bennett Parrish, Global Economist at J.P.Morgan, commented: “The J.P. Morgan global manufacturing output PMI fell 2.0-pt to 50.2 in July, its largest single-month drop since June 2023.”
He continued, “In addition to a slowdown in output growth, survey details suggested declining new order intakes and moderation in the pace of hiring. Although the Euro area remained the weakest performing region, output growth slowed sharply in both the US and China according to the July surveys.”
Data broken down by sector signalled output growth in the consumer and intermediate goods industries (albeit weaker than in the prior survey month).
Investment goods production fell for the second successive month, marking the first back-to-back contractions in the sector since late 2023.
The sector picture was bleaker in the case of new business, with all three sub-industries seeing declines.
The steepest was in the investment goods category, whereas the declines at consumer and intermediate goods producers were only mild.
Of the 32 nations for which July PMI data were available, only 15 registered an increase in manufacturing production. India saw the fastest rate of expansion, while growth was also recorded in China, the US, the UK, and Brazil.
Although the euro area remained the main source of weakness – with output falling across the currency bloc for the sixteenth month in a row – sharp growth slowdowns in China and the US alongside renewed contraction in Japan also contributed to the slowdown at the global level.
Average input costs and selling prices both continued to rise during July, although rates of increase eased in both cases. Inflation of purchasing costs and output charges was (on average) still stronger in developed nations compared to emerging markets.
Parrish concluded: “The pricing PMIs eased in July, but cost concerns remain, especially given the ongoing inflationary impact of higher shipping costs.”
