Manufacturing PMIs suggest deepening global economic gloom

Not wishing to bring everyone down at the end of this week of Olympic hysteria, but did you notice the various Manufacturing indices that were published this week?

The US was the brightest spot, but even here, the rate of growth slowed and was below expectations. Here’s the Telegraph.

The final Markit US Manufacturing Purchasing Managers Index stood at 51.4 in July, below both a preliminary estimate of 51.8 and June's reading of 52.5. It was the lowest reading since September of 2009. A reading above 50 indicates growth.

Meanwhile in Europe, we can only dream of an Index like that, lad. (We lived in a hole in the ground...)

The Purchasing Managers Index (PMI), fell to 44.0 points in July, down from 45.1 points in June.  So decline is accelerating here with the Index at a 37-month low. And Markit warned that rates of manufacturing decline in Germany, France and Spain were "either at or close to the steepest since mid-2009."  Ireland was the only country showing growth.

In Britain the latest Markit/CIPS purchasing managers' index (PMI), dropped to 45.4 in July, almost as bad as the rest of Europe, contracting for a third consecutive month after readings of 48.6 and 45.9 in June and May.

China fared slightly better, but a reading of 50.1 on the official purchasing managers' index (PMI)was below expectations, marginally down from June’s 50.2 and indicating a flat position. Elsewhere in Asia, the news was gloomier, with signs that the pace of contraction is increasing. In South Korea, the HSBC manufacturing PMI dropped to 47.2 from 49.4, and Taiwan's HSBC PMI deteriorated to 47.5 from 49.2.

So the chances of the global economy slipping back into recession looks to be increasing, and while this may relieve pressure on commodity prices, it brings a whole raft of new issues for procurement people to consider. In particular, keeping a close eye on the financial stability of your key suppliers, wherever in the world they’re situated, must be a priority.

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