Global Manufacturing PMI: Saved by the U.S.

By Prieur du Plessis, on December 2nd, 2011 posted in: Economy

The contraction in the global manufacturing sector continued in November. The global manufacturing PMI that I calculate on a GDP-weighted basis for the major economic regions was virtually unmoved at 49.6 from October’s 49.5. The relatively unchanged PMI masks significant changes in the individual countries and regions, though.

The global manufacturing sector was saved by a higher than expected showing in the U.S. as my calculations show the global PMI excluding the U.S. fell from 48.7 in October to 47.8 In November. The ISM Manufacturing PMI surged by 1.9 to 52.7 from 50.8 in October. Outside the U,S., South Africa, Russia, Turkey and India were the only other economies where manufacturing expanded. The contraction in Brazil’s manufacturing sector eased significantly.

The downturn in the Eurozone is gathering pace as the contraction in France and Germany, the two major economies in the region, is deepening. The Markit Eurozone Manufacturing PMI fell to 46.4 in November from 47.1 in October. After Ireland fell back into contraction, the manufacturing sectors of all countries in the Eurozone are now in recession while the contagion widened to emerging European economies. In both China and Japan the expansion ended abruptly. Elsewhere in the Far East the contraction in Taiwan continues and the contraction in South Korea has deepened.

	Manufacturing PMI		Direction	Rate of Change
Country	Nov-11	Oct-11	Direction	Rate of Change
U.S.*****	*52.7*	*50.8*	Growing	Faster
Eurozone*	*46.4*	*47.1*	Contracting	Faster
Germany*	47.9	49.1	Contracting	Faster
France*	47.3	48.5	Contracting	Faster
Greece*	40.9	40.5	Contracting	Slightly slower
Italy*	44.0	43.3	Contracting	Slight slower
Spain*	43.8	43.9	Contracting	Slightly faster
Ireland*	48.5	50.1	Contracting	From growing
U.K.*	*47.6*	*47.4*	Contracting	Slightly slower
Japan*	*49.1*	*50.6*	Contracting	From growing
Australia*	47.8	*47.4*	Contracting	Slightly slower
*Emerging Economies*
Brazil*	48.7	46.5	Contracting	Slower
China**	49.0	50.4	Contracting	From growing
China S/A	48.3	50.6	Contracting	From growing
Czech*	48.6	51.7	Contracting	From growing
Poland*	49.5	51.7	Contracting	From growing
Turkey*	52.3	53.3	Growing	Slower
India*	51.0	52.0	Growing	Slower
Russia*	52.6	50.4	Growing	Faster
Taiwan*	43.9	43.7	Contracting	Slightly slower
RSA***	51.6	50.5	Growing	Faster
S Korea	47.1	48.0	Contracting	Faster
Global****	*49.6*	*49.5*	Contracting	Slightly slower

Sources: Markit*; Li & Fung**; Kagiso***; Plexus Asset Management****; ISM*****

Sources: Markit*; Li & Fung**; Plexus Asset Management****; ISM*****

The current state of the global manufacturing sector leaves global central bankers no other choice but to act aggressively to stop the rot. We should expect more announcements in coming weeks regarding lower reserve requirements for banks and interest rate cuts in countries where these cuts can still have a major impact on the economy, especially countries in the BRICS block.

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