Tuesday, January 4, 2011

Global Manufacturing PMI Up in December! (Chart) "Robust improvement in overall operating conditions"


Global Manufacturing PMI by JPMorgan

Global Manufacturing PMI Up a Strong +1.1% in December

Official Statement by JPMorgan The global manufacturing sector ended 2010 on a strong footing. Rates of growth in production and new orders accelerated, leading to a further solid increase in employment. At a six-month high of 55.0 in December, the JPMorgan Global Manufacturing PMI™ pointed to a robust improvement in overall operating conditions. The PMI has remained above the 50.0 no change mark throughout the past one-and-a-half years. The average reading for the PMI in Q4 2010 was above that in Q3 but below the six-year high reached in the second quarter.
* Please note that PMI data for the United Kingdom were not available for inclusion in the Global PMI at the time of publication.
* Manufacturing The expansion in output remained broad-based by nation, with only Japan and Greece reporting contractions. Growth accelerated sharply in the US and the Eurozone, while also remaining strong in China
* New Orders Higher levels of new business were seen in the US, the Eurozone and China, while Japan and Greece were the only nations to report reductions.
* New Export Orders International trade volumes continued to improve in December.
* Manufacturing Employment Emerging job creation was seen in the US, the Eurozone (including a survey record rate of increase in Germany) and China. In contrast, Japan saw a modest reduction in staffing.
* Input Prices rose at the second-fastest pace since April's 20-month peak in December.
* Commenting on the survey, David Hensley, Director of Global Economics Coordination at JPMorgan, said: "December saw the PMI indexes for output and new orders push further away from their recent lows. This acceleration towards year-end suggests the sector will enter 2011 on a firmer footing than looked likely at the end of Q3. Job creation also remained solid, which will be a boost for the broader economic recovery."
Cycle History The current JPM Manufacturing PMI is up +21.3 and +63% from the Great Recession cyclical bottom of 33.7 in December 2008. The PMI is down -2.8 and -5% from the recent post-Great Recession 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 decreased the 5 subsequent months before the October, November, and December increases. The current PMI has remained below the level 12-month moving average of 55.1 for 6 consecutive months, but still above the sharply ascending 24-month moving average of 50.9. (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 25 months of the Purchasing Managers' Index (PMI) from the December 2008 Great Recession cyclical bottom through the latest month reported, December 2010. The PMI has been greater than 50, indicating global manufacturing is expanding, since August 2009, for 18 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, November, and December increases.  However, the PMI still indicates global manufacturing has been expanding since August 2009.

Commentary The December Global Manufacturing PMI of 55.0 and a strong +1.1% increase from November is encouraging after 5 consecutive monthly declines through September. The USA Manufacturing PMI also increased in  December, is still expanding, and is reviewed here . The Q4 2010 (October, November, and December) data appear to signal a trend reversal. As noted by David Hensley, Director of Global Economics Coordination at JPMorgan, "(The December) PMI indexes for output and new orders pushed further away from their recent lows."

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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*Data courtesy of the Institute for Supply Management and JPMorgan*

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