The global manufacturing sector’s health signalled deterioration in April 2023, according to the S&P Global Manufacturing PMI, which surveys over 13,500 companies in over 40 countries. While output and employment showed improvements, new orders, stocks of purchases, and supplier delivery times indicated a deterioration. Despite this, business optimism is at a 14-month high, as manufacturers predict growth in output for the remaining part of the year.
The Global Manufacturing PMI for April stood at 49.6, unchanged from the previous month. A closer look at individual nations revealed that the United States witnessed accelerated output growth, reaching its highest point in 11 months. China also experienced expansion, whereas Japan and the euro area reported declines. Despite these mixed results, global manufacturing new orders continued to decline. This further deterioration in demand for goods was attributed to factors such as the rising cost of living, a shift towards spending on services in the post-pandemic era, and a preference for reduced inventory levels among clients. Notably, new work received decreased in the intermediate and investment goods industries.
The manufacturing sector sustained its upward momentum at the start of the second quarter, with output increasing for the third consecutive month. This growth was primarily driven by a solid expansion in consumer goods production, while the investment goods industry also saw marginal growth. However, the intermediate goods category continued to experience a downturn, albeit at a slower rate than before.
In April, employment in the manufacturing sector saw a slight increase for the third straight month, with job creation occurring in the US, the euro area, and Japan. The intermediate and investment goods sectors witnessed growth, while there was no change in employment levels among consumer goods producers.
Average vendor performance improved for the third consecutive month, indicating a gradual easing of supply chain pressures after the substantial disruption experienced over the past three years. Additionally, lead times decreased to their lowest level since May 2009. Meanwhile, both average input costs and selling prices increased at a slower rate in April, reaching their lowest levels since June 2020 and September 2020, respectively.
Eurozone
The Eurozone Manufacturing PMI survey for April 2023 revealed a concerning fragility in the growth of the manufacturing sector. Both output and new order inflows experienced a sharp decline, while production volumes fell for the first time this year. Despite these challenges, business sentiments showed a slight improvement compared to the previous month’s 26-month low. Firms remained cautiously optimistic about growth prospects in the next 12 months.
The Eurozone PMI continued to hover below the 50.0 mark, registering at 45.8 in April 2023, down from 47.3 in March. This decline signifies worsening operating conditions in the Eurozone manufacturing sector, reaching its lowest level since May 2020. Among the eight Eurozone countries surveyed, only Greece performed above the 50 PMI threshold, with a value of 52.4. Spain, Ireland, Italy, France, the Netherlands, Germany, and Austria followed with PMI values of 49.0, 48.6, 46.8, 45.6, 44.9, 44.5, and 42.0, respectively.
In April, Eurozone manufacturing output experienced its most rapid decline since December 2021. Production volumes suffered due to worsening demand conditions at the beginning of the second quarter. New orders faced a twelfth consecutive month of decline, with the rate of decline accelerating compared to the past four months. The decrease in new export orders reflected the ongoing slump in international markets. Businesses reported customer hesitancy in placing orders, attributed to rising prices and global economic uncertainty, which limited new business opportunities.
In April, inflationary pressures in the Eurozone eased as supply chains improved. Manufacturing sector data indicated ample capacity, with backlogs of work declining for the eleventh straight month at the sharpest rate since November. Average input costs experienced a marked decline, the quickest in nearly three years. However, employment levels continued to rise for the twenty-seventh consecutive month.
As manufacturers reduced their purchasing activities in April, suppliers in the Eurozone had increased capacity, enabling faster deliveries. Consequently, supplier delivery times shortened to the greatest extent since 1997. Improved supply conditions, combined with ongoing purchasing cutbacks, led to a third consecutive monthly decrease in pre-production inventories across the Eurozone.
United States
In April 2023, the US manufacturing sector exhibited a modest recovery in operational conditions, highlighted by a substantial increase in output. Production grew at the fastest rate since May 2022, signifying a positive trend. Confidence among firms reached its highest level in three months, driven by planned investments, improved supply chain reliability, and optimistic expectations of an upswing in client demand.
The US Manufacturing PMI recorded a value of 50.2 in April, surpassing March’s 49.2 and marking the first time in six months that it rose above the neutral mark of 50.0. This achievement represented the highest reading since October 2022. The overall upturn was supported by a revival in new order growth, following six consecutive months of contraction. However, the increase in new sales was only marginal, as businesses reported customer hesitancy in placing orders due to rising prices and global economic uncertainty. Notably, the improvement in demand was primarily confined to the domestic market, as new export orders continued to decline for the eleventh consecutive month and at a significant pace.
In April, output levels in the US manufacturing sector increased for the second consecutive month. This growth represented the swiftest rate observed in nearly a year. The expansion was bolstered by an increase in employment, improved supply chains, and encouraging signs of demand improvement. However, the month also saw a rise in input costs and output charges at a more pronounced pace. Inflationary pressures were primarily driven by higher supplier prices, leading firms to pass on the increased operating expenses to customers. The rate of cost inflation reached its highest level in three months, while the pace of selling price increases was historically high. Notably, these price hikes occurred despite significant enhancements in supply chain stability.
Vendor performance experienced its strongest improvement since May 2007, as material availability increased. Nevertheless, manufacturers continued to reduce their purchasing activity due to subdued demand conditions and sufficient inventory levels. Companies intentionally depleted their stocks of purchases and finished goods, utilising inventories to supplement production, resulting in contractions in both areas.
In April, the US manufacturing sector witnessed a robust increase in employment, driven by the filling of long-standing vacancies and positive expectations of future new orders. Manufacturers expanded their workforce at the fastest rate in seven months to enhance their capacity. As a result, they were better equipped to handle incomplete work. Backlogs of work continued to decrease, albeit at a solid pace, marking the seventh consecutive month of decline, but the slowest rate of decline in this sequence.
China
The latest PMI data for April 2023 showed a slight decline in the overall business conditions of China’s manufacturing sector. Although output increased marginally, there was a decrease in overall new business. However, firms remained optimistic about the 12-month outlook for output, with the second-strongest degree of optimism seen in two years. They were hopeful that customer spending would recover in the coming months, supported by new product releases, state policies and investment in new equipment.
China’s Manufacturing PMI recorded a marginal decline, slipping from the neutral level of 50.0 registered in March to 49.5 in April. This decline marked the first deterioration in the sector’s health after a three-month period of stability. The primary reason behind this lacklustre performance was subdued demand conditions, with total new orders falling slightly for the first time in three months. Several firms highlighted that sluggish market conditions and weaker-than-anticipated customer spending had hampered sales. The underlying data revealed that the decline was primarily due to softer domestic demand, as new export work remained broadly stable. Subdued demand conditions contributed to a further fall in overall employment in the sector, but helped to ease supply chain pressures, with lead times for inputs improving slightly.
Moreover, production growth in April decelerated for the second consecutive month, with output increasing only fractionally overall. The recovery in business operations led to a slight increase in output. However, purchasing activity expanded at the slowest pace in three months during the latest survey period, reflecting weak demand conditions. On a positive note, suppliers’ delivery times improved for the third consecutive month in April. Nevertheless, backlogs of work continued to expand for the fourth month in a row, albeit at a modest pace.
The manufacturing industry observed a decline in average input costs in April, which was the first drop in seven months. This decline was the most rapid since January 2016 and was attributed to lower prices for certain raw materials and fuel. As cost savings were often extended to customers in the form of lower selling prices, firms sought to attract new business, and the rate of price cuts was the swiftest since December 2015.
India
In April 2023, India’s Manufacturing PMI indicated improved operating conditions for the manufacturing industry. Factory orders and production experienced the strongest growth rates of the year, leading to increased job creation. Companies also benefitted from mild price pressures, better international sales, and improved supply-chain conditions. The overall level of positive sentiment rose since March as firms were confident that production volumes would be higher in 12 months’ time, amid demand resilience, client enquiries, orders pending approval and marketing efforts.
In April, India’s Manufacturing PMI surged from 56.4 in March to 57.2, marking the sector’s most significant improvement this year. New orders experienced rapid growth, reaching the fastest pace since December, with expansion rates surpassing long-term averages. This positive trend was fuelled by favourable market conditions, robust demand, and effective publicity. Additionally, output saw a notable increase, achieving its sharpest rise in four months.
Driven by strong new business growth and heightened production requirements, manufacturers actively bolstered their input inventories. The accumulation of stocks accelerated considerably, supported by the growth in purchasing activities. Notably, purchasing activity expanded for the twenty-second consecutive month, exhibiting a robust rate not seen since February 2021. Despite the surge in purchasing activity, suppliers were able to deliver inputs in a timely manner in April.
In April, Indian manufacturers reported higher operating costs attributed to fuel, metals, transportation, and some other raw materials. However, despite a quickening since March, the overall inflation rate remained below its long-run average. Charge inflation also increased, reaching a three-month high and matching its long-run average. However, only 6 per cent of companies raised their fees, while 92 per cent left them unchanged. Goods producers saw a slight increase in outstanding business volumes.
Firms responded by taking on additional workers to expand their capacities. While the upturn in employment was only slight, it marked a significant improvement from March’s fractional reduction.
Japan
In April 2023, Japan’s Manufacturing PMI indicated a slower improvement in operating conditions due to weak domestic and global economic trends. This led to contractions in demand and production, although the rate of deterioration eased to the mildest in the past six months. The reduction in new order inflows was the slowest since July 2021, contributing to the milder decline. Supply chains continued to recover, with average lead times lengthening by the smallest amount in the past 39 months of deterioration. Despite the challenges, business confidence remained strong, as firms were optimistic about the market recovery that could drive new product launches and lead to demand improvements.
The manufacturing PMI index rose slightly from 49.2 in March to 49.5 in April, indicating the sixth consecutive deterioration in the Japanese manufacturing sector. However, this decline was mild and represented the softest reduction in the sequence. The improvement in the index came from a slower reduction in total new order inflows, which had been contracting for ten straight months, but at the slowest pace since November 2021.
Weak economic conditions, both domestically and globally, weighed on demand and client confidence, resulting in a decline in foreign demand and production levels. With new orders remaining in contraction territory, Japanese manufacturers focused on clearing backlogs of work, which decreased for the seventh consecutive month. Additionally, employment levels continued to rise for the twenty-fifth month in a row, showing the strongest growth since last October.
In April, manufacturing firms faced historically high levels of inflationary pressure due to the rising costs of inputs, which were exacerbated by input shortages and a weak exchange rate. However, the rate of input price inflation was the slowest since August 2021. To maintain profitability, firms increased their selling prices, resulting in the strongest rate of output charge inflation in five months. Furthermore, output declined sharply in April as firms continued to reduce their input purchases. However, there was a modest accumulation of pre- and post-production inventories during the month.
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