Global manufacturing down in June to lowest in 3 years: PMI

Global manufacturing activity shrunk in June at the fastest pace in three years, pulled down by the euro zone as also due to weakness at US and Chinese factories, according to a business survey.

The JPMorgan Global Manufacturing PMI retreated to 48.9 in June from 50.6 in May, sliding under the 50 mark separating growth from contraction for the first time since November, and falling its lowest reading since June 2009.

According to David Hensley, director of global economics coordination at JPMorgan, inventory adjustments appeared to be driving the contraction in manufacturing, with the PMI showing that the rate of stockbuilding (finished goods) remained quite elevated amid sluggish gains in final expenditures.

While manufacturing activity was down across the globe, the demand for raw materials too was down, leading to a fall in input prices for the first time in seven months, JPMorgan said.

The indicator, produced by JPMorgan with research and supply management organisations, takes into account survey data across 20 countries including the US, Japan, Germany, France, Britain, China and Russia.

Meanwhile, Indian factories in June stepped up production hiring workers at the fastest rate in over two years, however slowing overseas demand took a toll on growth in new export orders, a survey showed on yesterday.

The HSBC manufacturing Purchasing Managers' Index (PMI) was up to 55.0 in June, a four-month high, from 54.8 in May, and has been above the 50 mark separating growth from contraction for over three years.

The survey, however, still gave rise to some concerns, as high prices continued to weigh on manufacturers, with both input and output costs up sharply from May. That served to underscore expectations the central bank would likely not cut key interest rates soon.