Global PMI rise above 50 for first time since May 2008

Global manufacturing activity expanded at a slower pace in August than in the previous month, reflecting slower growth of new orders and a waning boost from inventory building, a survey showed on Wednesday.

The Global Manufacturing PMI, compiled by JP Morgan with research and supply organisations, revealed that the rebound of the global manufacturing sector continued to gain traction in August to 53.1, up from 50.0 in July and rose above the neutral 50 mark for the first time since May 2008.

Production increased for the third month running in August and at the fastest pace for forty months.

The expansion was broad-based by nation, with gains especially marked in the US with growth at a near four-year high, Japan at three-and-a-half year high, and emerging Asian economies.

The rate of expansion in China hit a 22-month peak, but in India eased to the weakest in the current period of recovery.

"The manufacturing PMI rose back above the no-change mark for the first time since May 2008, as the rebounds in output and new orders gained real traction. Signs are that these gains will be sustained in the coming months, as the stock cycle remains supportive and the new orders-to-inventory ratio hit a record high.

Job losses in the sector are abating as production and orders surge," said David Hensley, director of Global Economics Coordination at JPMorgan.

European economies tended to lag behind the rest of the nations surveyed. However, output growth was signalled in the Eurozone for the first time since May 2008 and gains recorded in the UK and Eastern Europe.

Within the Eurozone, the 'big-two' of France and Germany led the upturn. Growth was muted, however, by the continued weakness of Italy and Ireland. Spain reported a drop in output following an increase in July.

Manufacturing new orders rose in August to the greatest extent since July 2004. Rates of increase hit 56, 41 and 23-month highs in the US, Japan and China respectively.

The Eurozone and Brazil saw slight gains in new orders for the first time since March 2008 and August 2008.

Gains were posted in almost all of the euro member nations, the exceptions being Italy and Ireland.

The UK and India saw growth of new work ease compared to July. Increased levels of new export business were also reported by global manufacturers.

August data pointed to a reduction in global manufacturing employment for the seventeenth month running. However, the rate of job losses eased to the weakest for a year. The decline remained broad-based by nation, with only China and Turkey amongst the nations covered to report an increase.

Stocks of purchases fell at a rapid pace in August. Of the countries for which data were available, only India reported a rise in pre-production inventories. Subsequently the forward looking new orders-to-stocks of purchases ratio rose to its highest level in the survey history.

Average input costs rose for the first time in eleven months in August, reflecting higher commodity prices. Cost inflation was especially marked in China, the US and Russia. In contrast, purchase prices fell in the Eurozone, Japan and the UK.

The Global Report on Manufacturing is compiled by Markit Economics based on the results of surveys covering over 7,500 purchasing executives in 26 countries. Together these countries account for an estimated 83 per cent of global manufacturing output.

* Compiled by Markit

* Source: World Bank