Manufacturing stabilises as eurozone concerns ease
Manufacturing in the US, Japan, Britain, Russia, Switzerland and Mexico recorded "solid rates of expansion", while the downturn in eurozone countries continued to ease, the global Purchasing Managers Index from JPMorgan and Markit Economics found.
While the global PMI index was unchanged at 50.6 in June, China, Taiwan, South Korea and Vietnam reported contractions last month.
"Overall, the outlook for the global economy is somewhat similar to last year, except that a lot of the tail risks that we were worried about - the concerns about the eurozone breakdown and the fiscal cliff - have eased," said Peter Dragicevich, a currency strategist at Commonwealth Bank.
There were more increases in output and new orders, while new export business declined for the first time in four months, led by the US and China. Jobs were also shed for the first time in seven months.
Mr Dragicevich said while there were concerns about China's slowing growth, which was reflected in its weaker PMI figures, the country was still expanding at a robust pace.
"China's slowing ... to a more sustainable level," he said.
"The medium-term outlook for China is still quite positive. There is a lot of urbanisation left to occur and that's a big level of support for commodity demand for Australia."
The US stockmarket rose following a further expansion in the US manufacturing sector in June, although the rate of growth was at its slowest in eight months. "Manufacturing clearly down-shifted a gear between the first and second quarters and is at risk of losing further momentum," Markit chief economist Chris Williamson said of a separate US-focused survey.
Mr Williamson said the continued weak order book growth was pointing to risks of stalling in the sector. "Firms are responding to the increasingly worrying order book trend by pulling back on recruitment," he said.
In the eurozone, the PMI rose to a 16-month high but still came in below 50, at 48.8, signalling a continued contraction.
The Australian Performance of Manufacturing Index rose 5.8 points in June to 49.6, just below the 50-mark, which signals an expansion in activity. But exports continued to struggle, the monthly survey, published on Monday, found.
The PMI numbers are based on company surveys and considered among the most reliable economic indicators.
Frequently Asked Questions about this Article…
The global Purchasing Managers' Index (PMI) from JPMorgan and Markit Economics showed global manufacturing continued to grow for the sixth month in a row, with the global PMI unchanged at 50.6 in June. Several countries—including the US, Japan, Britain, Russia, Switzerland and Mexico—recorded solid expansion, while China, Taiwan, South Korea and Vietnam reported contractions.
According to Peter Dragicevich, a currency strategist at Commonwealth Bank, many of the major tail risks that worried markets—such as the eurozone breakdown and the US fiscal cliff—have eased. That reduced level of tail risk makes the overall global economic outlook look similar to last year, which investors often interpret as a lower immediate downside risk to markets.
US manufacturing expanded further in June, but the rate of growth slowed to its weakest in eight months. The US stockmarket rose on the news, but Markit chief economist Chris Williamson warned that manufacturing has down-shifted a gear and weak order-book growth creates a risk of stalling, with firms already pulling back on recruitment.
The survey showed weaker PMI figures for China, reflecting a slowdown, but Peter Dragicevich noted China was still expanding at a robust pace. He said the medium-term outlook for China remains positive because continued urbanisation should support commodity demand—an important consideration for countries like Australia.
The global PMI survey reported more increases in output and new orders, but new export business declined for the first time in four months (led by the US and China). Jobs were also shed for the first time in seven months, highlighting some near-term pressure on employment in the sector.
The eurozone PMI rose to a 16‑month high in June but remained below the 50 threshold at 48.8, which signals a continued contraction in eurozone manufacturing despite improvement from earlier weakness.
The Australian Performance of Manufacturing Index rose 5.8 points in June to 49.6, sitting just below the 50 threshold that separates expansion from contraction. The monthly survey also found that exports continued to struggle—data points that local and international investors often watch for signs of domestic demand and export health.
PMI numbers are based on company surveys and are considered among the most reliable and timely economic indicators. The report cited here was produced by JPMorgan and Markit Economics, and investors use PMI data to gauge manufacturing momentum, export trends, hiring, and broader economic health.
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