Global manufacturing recovery holds in June but momentum fades

Growth slowed for the second month running as optimism dipped.

The global manufacturing recovery held its course in June, though fresh data point to a sector losing some of its earlier momentum.

Factories worldwide kept expanding output, but the pace of growth in both production and new orders slackened for a second consecutive month, whilst business confidence slipped to its weakest in eight months and job cuts returned.

The J.P.Morgan Global Manufacturing PMI, compiled by S&P Global with the Institute for Supply Management and the International Federation of Purchasing and Supply Management, registered 52.2 in June.

The reading was down from May’s 50-month high of 52.7 and marked the softest reading since March. Even so, the index has now stayed above the 50.0 no-change threshold — the line separating expansion from contraction — for eleven months in succession.

Job losses fastest in nearly a year

Four of the five components that feed into the headline figure still pointed to improving conditions. Output, new orders and pre-production stockpiles all rose, and suppliers took longer to deliver goods, a sign of stretched supply chains. Employment, however, fell for the third time in four months, with the pace of job losses the quickest in eleven months. Cuts in the United States and the eurozone outweighed hiring gains in mainland China, Japan and Britain.

A note accompanying the release flagged that Canadian figures arrived too late this month to be folded into the global calculation.

Output climbed for an eleventh straight month, with growth recorded across consumer, intermediate and investment goods. Investment goods led the way, whilst consumer products lagged behind. Regionally, output rose in mainland China, the United States, the eurozone, Japan and Britain — though the pace eased in the first two and quickened in the latter three.

New orders increased for a sixth successive month but at the slowest rate since March, held back by a contraction in international trade. Some manufacturers reported that the earlier boost from clients stockpiling against supply disruption was beginning to fade.

Business optimism, meanwhile, fell for the first time in three months, with sentiment softening in the US and mainland China, holding steady in Japan, and climbing to a four-month high in the eurozone.

On costs, supply chains stayed under strain, with delivery times lengthening to some of the greatest extents seen in four years. Inflationary pressures nonetheless eased further, with input and output price growth both slowing to three-month lows.

Maia Crook, global economist at J.P. Morgan, said the headline index’s half-point fall still left it close to a five-year peak, and that forward-looking indicators were mixed: new orders remained near a four-year high, even as the future output gauge slipped to an eight-month low. She added that input and output price growth had both eased amidst a recent drop in energy prices, though costs remained well above pre-conflict levels.