Wednesday, February 2, 2011

Global Manufacturing PMI at 9-Month High (Chart) *19th month of expansion*

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Global Manufacturing PMI by JPMorgan


Global Manufacturing PMI at 9-Month High

Official Statement by JPMorgan At 57.2 in January, up from 55.6 in December, the JPMorgan Global Manufacturing PMI* rose to a nine-month high. The PMI has remained above the neutral 50.0 mark, signalling expansion, for 19 consecutive months. Growth of production and new orders continued to accelerate, leading to survey record job creation.
Manufacturing production increased for the twentieth successive month in January, with growth of output the highest since last April. Amongst the largest industrial regions covered by the survey, rates of expansion accelerated in the US (eight-month high), the Eurozone (fastest since last April), the UK (sixteen-year high and India. Chinese production also rose at a solid clip, albeit the slowest in four months, while Japan saw output increase for the first time since September 2010.
New Orders Underpinning robust growth of production was the steepest increase in new orders for a year.
New Export Orders International trade flows also strengthened, with the rate of growth in new export business the sharpest since last May.
Manufacturing Employment rose at the fastest pace in the survey history in January. Staffing levels have now risen in each of the past 14 months. Job creation in the US was the fastest since April 1973. Survey record rates of increase were also seen in Germany, the UK and Austria. Jobs growth was the fastest since October 2000 in the Eurozone. Employment rose for the third month running in China and for the first time since July in Japan.
Input Prices January saw cost inflation pick up sharply to reach a two-and-a-half year high. Amongst the largest industrial regions covered, rates of increase rose to the strongest since July 2008 in the US and hit record highs in the Eurozone and the UK. Cost inflation also accelerated in Japan, but eased slightly in China.

* The Global PMI was revised for several months of 2010. Not all the revisions are incorporated into the chart and commentary below. The January 2011 and December 2010 PMIs are correct. The revisions not included are immaterial and do not change the long-term trend or conclusions. *

Cycle History The current JPM Manufacturing PMI of 57.2 is up +23.5 and +70% from the Great Recession cyclical bottom of 33.7 in December 2008. The PMI is down -0.6 and -1% 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 has increased 4 consecutive months. The current PMI has been above the slightly ascending 12-month moving average of 55.2 for 2 consecutive months and continues above the sharply ascending 24-month moving average of 51.9. (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 26 months of the Purchasing Managers' Index (PMI) from the December 2008 Great Recession cyclical low of 33.7 through the latest month reported, January 2011. The PMI has been greater than 50, indicating global manufacturing is expanding, since August 2009, for 19 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 the latest 4 monthly increases.  However, the PMI still indicates global manufacturing has been expanding since August 2009.


Commentary The PMI was revised for several months of 2010, so the above commentary and monthly data changed somewhat from previous monthly posts. The January 2011 Global Manufacturing PMI of 57.2 and a strong +1.6% increase from December is very encouraging to start 2011. There have been some forecasts that predict a dip in both the USA and Global pace of recovery in Q1 2011. The USA Manufacturing PMI also increased strongly in  January and is reviewed here . The Q4 2010 (October, November, and December) data were a trend reversal to the upside from Q3 2010.

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 almost 30 countries. Together these countries account for an estimated 86% 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.
Data sources: Country % share of global GDP
United States 28.6
Japan 12.3
China 7.4
Germany 5.0
United Kingdom 4.2
France 3.7
Italy 2.8
Brazil 2.2
India 2.2
South Korea 1.9
Spain 1.8
Australia 1.4
Netherlands 1.1
Russia 1.0
Turkey 0.9
Taiwan 0.8
Switzerland 0.7
Poland 0.6
Austria 0.5
South Africa 0.5
Denmark 0.4
Greece 0.4
Israel 0.4
Singapore 0.4
Ireland 0.3
Czech Republic 0.2
New Zealand 0.2
Hungary 0.1

J.P. Morgan Chase & Co. is a leading global financial services firm with assets of $803 billion and operations in more than 50 countries. The firm is a leader in investment banking, financial services for consumers and businesses, financial transaction processing, investment management, private banking and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase is headquartered in New York and serves more than 30 million consumer customers nationwide, and many of the world’s most prominent corporate, institutional and government clients. Information about JPMorgan Chase is available on the internet at http://www.jpmorganchase.com/.

Markit Economics is a specialist compiler of business surveys and economic indices, including the Purchasing Managers’ Index™ (PMI™) series, which is now available for 26 countries and key regions including the Eurozone and BRIC. The PMIs have become the most closely-watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more go to www.markit.com/economics.

Founded in 1915, the Institute for Supply Management™ (ISM) is the largest supply management organization in the world as well as one of the most respected. ISM's mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education. ISM's membership base includes approximately 40,000 supply management professionals with a network of domestic and international affiliated associations. ISM is a not-for-profit institute that provides opportunities for the promotion of the profession and the expansion of professional skills and knowledge.

The International Federation of Purchasing and Supply Management (IFPSM) is the union of 42 national purchasing associations worldwide. Within this circle, about 200,000 purchasing professionals can be reached. IFPSM is a non-political, independent and non-profit oriented international organisation, registered in Aarau, Switzerland. IFPSM facilitates the development and distribution of knowledge to elevate and advance the procurement profession, thus favourably impacting the standard of living of citizens worldwide through improved business practices.


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


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