Global Manufacturing PMI Signals Stagnation in February

The word of the day is “stagnation”.

According to Markit, German manufacturing is at a 15-month low; Eurozone manufacturing is at a 12-month low; US production is weakest since October 2013; Chinese manufacturing has some of the worst readings since 2009.

Our stagnation roundup starts with a summary: Global Manufacturing PMI Signals Stagnation in February.

February saw the growth rate of global manufacturing output slow to near-stagnation. Inflows of new business rose only marginally, while new export orders and employment both contracted. The J.P.Morgan Global Manufacturing PMI™ posted 50.0 in February, a 39-month low and identical to the no-change level that signals stagnation. The downturn in emerging nations accelerated to its fastest since last September, while growth across the developed markets slowed to a 33-month low.

Global Manufacturing Summary

Global Manufacturing1

Eurozone PMI Falls to 12-Month Low in February

In Europe we see a divergence between the core and the periphery as the Eurozone PMI Falls to 12-Month Low.

Key Points

  • Eurozone Manufacturing PMI at 51.2 in February
  • Slower growth of production, new orders, export business and employment
  • France and Germany hover close to stagnation mark
  • Greece slips back into contraction

Global Manufacturing2

Don’t expect Eurozone growth if Germany and France slip into contraction. By the way please note Spain, allegedly mired in deflation.

Germany Manufacturing PMI Drops to 15-Month Low

Diving into details of the Eurozone weakness we see Germany Manufacturing PMI Drops to 15-Month Low.

Key Points

  • PMI dropped from January’s 52.3 to a 15-month low of 50.5.
  • Production rises at slowest pace since December 2014.
  • Employment falls for first time in one-and-a-half years.
  • Steepest drop in input costs since financial crisis.


Commenting on the final Markit/BME Germany Manufacturing PMI ® survey data, Oliver Kolodseike, economist at Markit and author of the report said: “It looks as if the German manufacturing engine has run out of steam, with the headline PMI falling to a 15-month low in February. Faced with weak domestic and foreign demand and slow production growth, manufacturers reduced their workforce numbers for the first time in one-and-a-half years. Moreover, with backlogs of work rising at the weakest rate since last July, there is certainly a danger that companies will continue to shed staff in coming months.

“Deflationary pressures meanwhile intensified, as low energy and raw material prices led to the steepest drop in input costs since the financial crisis. Although companies were able to reduce their selling prices to the greatest extent since the summer of 2013, demand remained subdued, as highlighted by the smallest gain in new business since last July. “Overall, the data are a serious blow to hopes that any meaningful growth in Germany’s manufacturing sector would resume at the beginning of the year.”

US Weakest Since October 2013

Unlike the ISM diffusion index which has been in contraction for five months, Markit mysteriously has the US economy expanding but at the Weakest Pace Since October 2013.

Key Points

  • Production volumes increase at slowest pace for 28 months in February
  • Jobs growth moderates to a five-month low
  • Sharpest decline in factory gate prices since June 2012


The headline index was up fractionally from the earlier ‘flash’ estimate in February (51.0), but this was still the second-lowest reading since October 2012. Moreover, the latest reading pointed to one of the weakest improvements in overall business conditions since the recovery began in late-2009.

Subdued export demand also weighed on new business levels in February. The latest survey pointed to the most marked decline in new orders from abroad since April 2015, which manufacturers partly linked to competitive pressures from the strong dollar.

February data highlighted a reduction in input prices for the sixth consecutive month. Manufacturers mainly commented on lower steel prices and energy costs. Reduced cost burdens and strong competition for new work in turn resulted in the fastest drop in output charges for over three-and-a-half years.

Markit US Manufacturing

I cannot account for the discrepancy between the ISM which has been in contraction for five months and Markit but the trends all point the same direction – lower.

For today’s ISM report please see Manufacturing ISM Contracts 5th Month Despite Rise in New Orders.

Dismal State of Manufacturing in China

Rounding out the dismal state of global affairs, please consider the Markit CaixinChina General Manufacturing PMI report.

Key Points

  • Output declines at steepest rate since last September as new work contracts further
  • Payroll numbers are cut at fastest pace since the start of 2009
  • Stocks of finished goods fall at quickest rate since September 2011


Commenting on the China General Manufacturing PMI™ data, Dr. He Fan, Chief Economist at Caixin Insight Group said: “The Caixin China General Manufacturing PMI for February is 48, down 0.4 points from the previous month. The index readings for all key categories including output, new orders and employment signalled that conditions worsened, in line with signs that the economy’s road to stability remains bumpy. The government needs to press ahead with reforms, while adopting moderate stimulus policies and strengthening support of the economy in other ways to prevent it from falling off a cliff.”

Two Words of the Day

I originally titled this post “Global Stagnation Roundup”. However, “stagnation” does not come close to explaining the sorry state of affairs.

Two words work nicely: “Global Recession”.

Mike “Mish” Shedlock