Global Manufacturing Conditions Stabilize in July

Global operating conditions stabilized in July, following a sustained period of weakness, according to the JPMorgan Global Manufacturing PMI, which stood at 50.0. PMIs remained above 50.0 in China, India and Turkey and rose back above this level in Japan and the UK for the first time in 17 and 16 months respectively.

The Global Manufacturing Output Index rose to an 18-month high in July. At a twenty-month high of 53.3, the Global Manufacturing New Orders Index pointed to an increase in new work received for the first time since March 2008. International trade volumes rose slightly in July, following ten months of sustained decline.

Global manufacturing started Q3 2009 on a strong footing," said David Hensley, director of Global Economics Coordination at JPMorgan. "The PMI indicates that growth continued to accelerate through July. The rebound is likely to gain traction in the coming months, as the forward-looking orders-to-inventory ratio surged to a record high. Job losses remain substantial, but signs are that the worst of the labor market retrenchment is now already behind us."

The new orders-to-inventory ratio - which tends to move in advance of production - continued to rise and hit a survey record high in July. Emerging markets - which generally entered recovery mode earlier - continued to report solid growth of production (on average) in July. Rates of expansion hit a 14-month high in China and growth steadied at an elevated level in India. East-European economies, Russia and Brazil all saw output fall, but at slower rates in all but Brazil.

Following recent solid recoveries, the US, Japan and the UK saw production rise at the fastest rates for 25, 34 and 19 months respectively. New orders rose at the strongest pace for two years in the US, while rates of increase hit 18 and 20-month highs in Japan and the UK. Eurozone production and new orders moved closer to stabilizing in July. Marginal gains in both variables were recorded in Germany, France, Spain, the Netherlands and Austria. Ireland was the only euro area nation to see output and new orders decline at accelerated rates.

Global manufacturing staffing levels fell for the sixteenth successive month in July. However, the Global Manufacturing Employment Index rose to 45.1, its highest level since last September. Of the countries covered, only China and Turkey reported higher employment.

At 47.6 in July, the Global Manufacturing Input Prices Index posted its highest reading since October 2008. Input prices fell in Japan, the Eurozone and the UK. Costs increased in the US and China - with the rates of inflation reaching eleven-month highs in both.