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
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
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.
Comments
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
Comments
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
Comment
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
Dow ‘UP’ ~300, baby! Ring-a-ding-ding, Jerry! Next stop – Dow 17,000!
But, of course, .. more monetary easing on tap … and that, uh, somehow will help.
Frankly, the high Dow one of my reasons why recession will be hard. Lofty markets allow Congress to do NOTHING. Not that it helped, but if you recall in early 2008 President Bush and Congress passed an Economic Stimulus Act ~ $150 billion taxpayer rebate to jumpstart consumption. No such thing till markets drop … a lot.
And as election grows near … inclination to wait till new POTUS on deck to handle any stimulus … of course, if markets melt down like 2008 prior to november …
” Dow ‘UP’ ~300, baby! Ring-a-ding-ding, Jerry! Next stop – Dow 17,000! ”
It’s all been remarkably orderly. The robots are implementing the high frequency trading algorithms with astonishing efficiency. The appearance at first blush is that volatility is rampant, chaos is everywhere, …but is it?
On the S&P, the high-to-low is a mere 15% and rounded off nicely on the days when inflection points were put in. Even at that, it took an ALL-TIME HIGH (2134) and an ALL-TIME WORST calendar year start to put in the (1820) low.
On top of that, it conveniently dovetailed with the turn of the 2015 tax year, in an (2016) election year at that. I’m starting to like these robots. You can dial in a fifteen to twenty percent correction and the computers deliver it like a pizza from Domino’s.
“Two words work nicely: “Global Recession”.”
Yep … I see ZERO drivers of growth in US or abroad for 2016. Inventories / Sales already at recessionary level. Downward slippage will continue. The parlor game now will be how long till bullz throw in the towel? Clearly remember Kudlow summer of 2008 taking on all comers on his show and stating unequivocally NO RECESSION. He finally threw in towel in September … then went immediately for bailout for banks – “Capitalism needs a reboot every 20 or 30 years” or some poppycock very close … Jerk.
Numbers from this story:
• 2008 Global PMI • EU at 12 month low • Weakest since 2013
Almost every article shows thinking that is too short term.
From the end of WWII to about 1990, the US was the driver of the world economy. Americans became so used to spending instead of savings that even in a recession we simply borrowed a bit more.
Spend, borrow, buy, was the habit.
When the internet made it possible to shift manufacturing to the cheapest labor countries, the US Middle Class, backbone of our society, lost the ability to be consumer of the world’s production.
It has taken a quarter century to finally show the effect. The US consumer is now working part time or temp jobs. Gone are the well-paying blue collar jobs which fueled the suburbs, sent our kids to college, and fostered a feeling of confidence that tomorrow would be better than today.
Out of necessity, we are now a nation of savers who, if not yet laid off, fear we will be anytime.
That same internet which took our manufacturing is now devastating retail jobs.
We are in a global deflationary environment as wages seek a common level. Even China, who got our jobs, is now losing jobs to Vietnam.
I thought we had already determined that our new society had “progressed” to the state where we no longer needed to make things…to produce, in order to create prosperity. I thought we simply needed to mandate that all things necessary for our happiness be supplied by government, either through the “creation” of money or simple theft from those who don’t really need it. Economic justice has been defined to mean that no one should be induced to labor to sustain one’s existence, that discomfort or simple inconvenience is cruel and unusual punishment only appropriate for mentally ill conservatives still foolish enough to think they can achieve any level of personal success.
Madashellowell,
This attitude began as a vote-getter under LBJ.
I was stationed at Ft. McClellan, AL, in 1963 and was appalled by the racial bias down south. I thought the 1964 Act would change all that, but it was soon followed by the War on Poverty, Aid to Dependent Children, Affirmative Action, all of which destroyed the black family.
After several generations of people who never worked and never have known anyone close who has had a job, it has spread so that now everyone thinks he “deserves” to be taken care of.
“Working the system” is now a way of life.
Well, why not? It has sure been good for those in our political parties.
The weekly Mish column about how we are in a recession. Got that out of the way.
Actually for most of the country except the fat cats living in the penthouses, the US has been in a depression. Income has not increased since 1970 and GDP has been stagnant since 1930.
We are in one.
Feel free to give reasons why we’re not in one.
The two things I’m sure of … when a recession can no longer be denied … you will not apologize and will disappear.