Sunday, December 5, 2010

Global Manufacturing PMI at 4-Month High (Chart) "Severe slowdown has reached a bottom"


Global Manufacturing PMI by JPMorgan

Global Manufacturing PMI at 4-Month High

Official Statement by JPMorgan At 53.9 in November, up further from September's 14-month low, JPMorgan Global Manufacturing PMI™ rose to its highest level since July. The headline PMI has now remained above the no change mark of 50.0 for 17 consecutive months.
* Amongst the larger nations covered by the survey, PMIs rose in China (eight-month high), Germany (three-month peak), the UK (highest since September 1994), France (ten-year high) and India (six-month peak). The Japan and Brazil PMIs also increased, but, in contrast to the other nations mentioned, remained below the 50.0 no-change mark.
* The US PMI signalled a robust improvement in manufacturing operating conditions, with the rate of increase only slightly below October's five-month high.
* Following a further expansion in November, manufacturing production has now increased throughout the past one-and-a half years. However, the rate of growth was slower than in October and below the average for the recovery thus far.
* Emerging Asian and core European economies led the latest expansion of output, with marked rates of increase seen in China, India, France, Germany and the UK. Growth remained solid in the US, but slowed sharply to a 17-month low. The extent of the easing in the US may have partly reflected payback from October's five-month growth high. Weakness remained in the Eurozone periphery, with output falling in Spain and Greece and growth barely registering in Ireland. Japanese production also fell.
* Commenting on the survey, David Hensley, Director of Global Economics Coordination at JPMorgan, said: "The November global PMI suggests that the severe slowdown in manufacturing activity has reached a bottom. In particular, the PMI indexes of new orders and output have moved off their recent lows. Output growth should gain speed heading into the new year as the drag from the inventory adjustment fades."
Cycle History The current JPM Manufacturing PMI is up +20.2 and +60% from the Great Recession cyclical bottom of 33.7 in December 2008. The PMI is down -3.9 and -6.8% from the recent cyclical peak of 57.8 in April 2010. Therefore, the current PMI is closer to the cyclical peak than the trough. The PMI is a percentage - not a total. More about the PMI below the chart.

Trend The current PMI continues below the April 2010 peak and had decreased the 5 subsequent months before the October and November increases. The current PMI has remained below the 12-month moving average of 55.1 for 5 consecutive months, but still above the 24-month moving average of 50.0. The 12-month moving average has leveled off and the 24-month moving average continues ascending sharply. The recent trend had been downwards, until the October and November increases. (The 12-month and 24-month moving averages charts are not shown on this page).

JPM Monthly Global Manufacturing PMI (Chart) Below is a chart of the latest 24 months of the Purchasing Managers' Index (PMI) from the December 2008 cyclical bottom through the latest month reported, November 2010. The PMI has been greater than 50, indicating global manufacturing is expanding, since August 2009, for 16 consecutive months. As can be seen, the PMI bottomed in December 2008 at 33.7, ascended significantly through August 2009 to 53.1. The PMI eventually continued upwards to a peak of 57.8 in April 2010. 5 consecutive monthly declines ensued until the October and November increases.  However, the PMI still indicates global manufacturing has been expanding since August 2009, just at times at a slowing rate.

Commentary The November Global Manufacturing PMI of 53.9 and a +0.2% increase from October is encouraging after 5 consecutive monthly declines through September. The USA Manufacturing PMI dipped in November, but is still expanding, and is reviewed here . The October and November data appear to signal a trend reversal. As noted by David Hensley, Director of Global Economics Coordination at JPMorgan, "The November global PMI suggests that the severe slowdown in manufacturing activity has reached a bottom."

About the PMI The Global Report on Manufacturing is compiled by Markit based on the results of surveys covering over 7,500 purchasing executives in 29 countries. Together these countries account for an estimated 90% of global manufacturing output. Questions are asked about real events and are not opinion based. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease. 50.0 = no change level.

Data sources: Country % share of global GDP
United States 28.8
Japan 12.8
China 6.5
Germany 5.2
United Kingdom 4.3
France 3.8
Italy 2.9
Brazil 2.1
India 2.0
South Korea 1.9
Spain 1.8
Australia 1.3
Netherlands 1.1
Russia 1.1
Turkey 1.0
Taiwan 0.8
Switzerland 0.7
Poland 0.6
Austria 0.6
South Africa 0.5
Denmark 0.4
Greece 0.4
Israel 0.4
Ireland 0.3
Singapore 0.3
Czech Republic 0.2
New Zealand 0.2
Hungary 0.2

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Other Links
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JPMorgan Global Manufacturing PMI Press Release (JPMorgan) (pdf download)
*Data courtesy of the Institute for Supply Management and JPMorgan*

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