Global Manufacturing PMIs Mostly Worsen in June

Among the eighteen reporters of manufacturing PMIs in June, only seven improve on a month-to-month basis. The table treats Canada as unchanged. Its June value is not available; for the purposes of statistics and aggregation, we're using the May value for Canada in June.

Over 3 months, 7 reporters show improved reading compared to 6 months. Over 6 months compared to 12 months, 8 reporters showed improvements in their manufacturing PMIs. Over 12 months compared to their level of 12-months ago, only four reporters show improvement: those are Mexico, Russia, India, and Indonesia.

For the most part, manufacturing continues to be under a great deal of pressure. The median reading for this group of countries this month is 47.8 on a PMI basis. However, despite the breadth of the deterioration, the median measure has not changed very much over the three horizons. In the table, over 12 months the PMI average is 48.8, over 6 months it falls to 48.1, and over 3 months it stabilizes at 48.2. All of these diffusion values show manufacturing activity declining on balance (all below 50), but declines are not getting worse according to the median statistics although they are getting worse based upon deteriorating breadth.

The ranking statistics show only five of these reporting entities with June readings above their historic medians. India has a strong 92-percentile standing, Mexico has an 88.5 percentile standing, Russia reports an 84.6 percentile standing, Indonesia has a 78.8 percentile standing, and Turkey has a 71-percentile standing. Apart from those, the standing of the other countries is generally much worse with the highest among the remaining countries being Japan at 48.1% and after Japan the next highest ranking being at 19.2% for Taiwan and for South Korea.

For some of the larger economies, the U.S. has a ranking for its S&P Global manufacturing PMI at its 5.8percentile, the euro area is at its 3.8 percentile, and the U.K. is at its 9.6 percentile. The large countries show a great deal of weakness in their manufacturing sectors; Japan is an exception.

Comparing these readings to where they were in January 2020 before COVID struck, there are only six countries that show better manufacturing PMI values in June 2023 than they had in January 2020. These are Russia that has a 4.7-point improvement, Indonesia that has a 3.2-point improvement, India that has a 2.5-point improvement, Mexico that has a 2.0-point improvement, Japan that has a 1.0-point improvement, and Turkey that has a 0.2-point improvement. By comparison, the median shows the decline of 1.7 points compared to January 2020. The euro area is weaker by 4.5 points and the U.S. is weaker by 5.6 points.

Summing up On balance, manufacturing remains under pressure globally. Inflation continues to overshoot its targets and central banks have been raising rates and they appear to be poised to raise rates further in the future to try to get control of what had been runaway inflation. Inflation since has been somewhat tamed, but it continues to run at a mark well above most central banks’ policy objectives. The weakness in manufacturing remains troublesome although services sectors have showed a little more resilience than manufacturing. The view on manufacturing from this report is that while the breadth in manufacturing is quite poor, the median measure hasn't changed very much and continues to hover just a couple of diffusion points below unchanged. Manufacturing globally is not tanking, but it clearly is challenged, weak and eroding. It will take time to see whether this manufacturing weakness is going to get worse and drag the services sector down or whether some service sector stability will be able to support growth in the global economy in the face of such manufacturing weakness.