The S&P Global manufacturing PMIs and services PMIs on a flash basis weakened in August. The European Monetary Union, Germany, France, the United Kingdom, Japan, and the United States each show a weaker composite, a weaker manufacturing reading, and a weaker services reading in August compared to July. Dialing back one month, July saw that out of the 18 assessments possible only four showed month-to-month improvements. The U.K. was an exception having an improvement in its service sector in July that also strengthens the headline; Japan was an exception in July having an improvement in services that also strengthened its headline. In June, there are only three of 18 comparisons that improve month-to-month; they include manufacturing in Germany and the services sector in Japan.
The unweighted average manufacturing PMI value in August has slipped to 49.5 showing contraction on average. This compares to an average level of 51.6 in July and at 54.4 in June. The average services reading for the six entries in the table has slipped with a diffusion rating of 49.2, indicating minor contraction. This is a slippage from a level of 53.4 in July and 54.8 in June. The deterioration for both manufacturing and services has been relatively recent and relatively rapid. Viewed as stand-alone readings in August, the EMU services sector at 50.2 still shows expansion, France at 51.0 shows expansion, the United Kingdom at 52.5 shows expansion. Manufacturing in August shows expansion in the U.S. and in Japan with Japan’s 51.0 diffusion reading and the U.S. reading of 51.3. Where there are exceptions, they are not glaring exceptions.
On balance, over these three months viewed individually and collectively, the weakness is broad.
When we compare the three-month, six-month and 12-month averages, we are comparing them from a base in July, not in August which still has preliminary data.
Over three months on this basis, there are 9 of 18 readings that strengthen - a split decision. Over six months, there are 8 of 18 readings strengthen. Over 12 months, most of the readings strengthen with only four of them weakening.
Composite readings
However, we can see from the table that August, once it gets into the mix, is going to be another weakening force that is going to weigh on these sequential trends. We can already see that the ranking of the August levels is extremely weak with the headline or a composite index ranging from the strongest value of a 36.4 percentile standing in Japan to the weakest standing at a 5.5 percentile standing in U.S. The average composite standing for the group is at a 22.5 percentile standing; it is in the lower 4th to lower 5th of the countries’ historic pooled queue of values.
Manufacturing and Services
Manufacturing standings on the other hand range between a high of a 45.5 percentile standing in Japan to a 3.6 percentile outstanding in the U.K. The average percentile standing for the group is at the 24.4 percentile mark in the lower one-fourth of its historic queue of values. Services standings range between a high of 45.5 percentile in the U.K. to a low of 5.5 percentile in the U.S. The average percentile standing is at the 30.2 percentile.
These readings all are weak. Not only are the preliminary readings all weak or weakening month-to-month but the queue standings all reside below the 50th percentile; that's across all countries and for all three sectors of the composite for manufacturing and for services. It means all sectors are performing at less than their median rate.
Looking at the changes the composite indexes back to January 2020 before COVID struck, all the composite indexes in this table are weaker than they were in January 2020. All the services sectors are weaker than they were in January 2020; only three manufacturing sectors are stronger than they were in January 2020 and those are for the European Monetary Union as a whole, for Germany, and for Japan.
The magnitudes of change
The one-month change in the composite indexes averages -3.9 points for manufacturing, the drop is -2.2 points, for the service sector it’s -4.2 points. In August, the services sectors were easing twice as fast as manufacturing. Over three months, the change in conditions is much flatter. The composite indexes declined by 5.5 points across these 6 table entries. The manufacturing sector is receding on average by 5.3 points over three months while the services sectors unwind by 5.6 points on average. Over three months, we're seeing roughly the same rate of erosion or deterioration in services as in manufacturing.
Over 12 months, conditions are a little bit different again. The 12-month average drop in the composite indexes is 6.8 points, while for manufacturing the average drop is 9.8 points and for the services sector the average drop is 6 points. Over 12 months, the manufacturing sectors are deteriorating faster than services. Germany is a minor exception to this trend. The U.K. conforms to it more significantly than any other country with a -14.1 drop in its manufacturing index over 12 months compared to just a -3.1 drop for services. Japan is the only country in the table that shows a 12-month improvement in services against a 1.7 drop in manufacturing.
Global
