Global Manufacturing Subdued in April

Best performing nations included the UK, U.S., Greece and Russia. The Eurozone PMI contracted for the third month and China posted a PMI of just 50.2. Global business optimism was at its fourth-lowest overall level in April. Survey participants expressed widespread concern regarding weak global demand and rising trade protectionism, as well as Brexit and subdued auto sales.

Eurozone manufacturers saw new orders continue to fall in April along with output. The manufacturing PMI showed the sector in deep decline at 47.9. Germany led the drag on the composite PMI with a reading of 44.4. Austria and Italy also posted PMIs in contraction and France was at the neutral mark of 50.0. Greece manufacturers enjoyed their biggest improvement in operating conditions, with growth at almost a 19-year high and a PMI of 56.6.

“Some encouragement can be gained from the PMIs having risen in all four largest euro member states in April, and forward-looking indicators such as future expectations, new order inflows and the orders-to-inventory ratio having all come off their lows,” commented IHS Markit chief economist Chris Williamson. “But it remains too early to call a turning point, especially as future sentiment remains around its lowest level since the end of 2012, hinting that the manufacturing downturn will persist in the coming months.”

Manufacturing activity in Russia improved moderately driven by domestic demand that provided a solid rise in production and new orders. The PMI registered 51.8 in April, down from 52.8 in March. Outlook confidence was at its second strongest rate since May 2013. IHS Markit expects industrial production to rise 2.0 percent in 2019, down from a 2.9 percent rise in 2018, mostly driven by oil and gas output.

Conditions in China improved slightly in April, remaining above contraction but retreating slightly from 50.8 in March to 50.2 in April. Production rose marginally as did new orders, but subdued foreign demand held back new export business. Output charges and input costs eased somewhat and inventories remained lean for both finished goods and raw materials. Planned product launches and company expansions buoyed optimism as well as expectations that global demand conditions will improve.

South Korea manufacturers have little confidence that global export headwinds will fade any time soon, said IHS Markit economist Joe Hayes. Production volumes stabilized in April, but weaker demand caused firms to offer discounts to clients even as input prices rose. Employment ticked up, but due to new working-hour regulations instead of production demand. The PMI pulled from contraction at 48.8 in March to 50.2 in April.

Manufacturing in Canada deteriorated for the first time since February 2016 with the PMI dipping to 49.7 in April. Production declined modestly and new orders fell for the second month in a row. Exports fell for the fourth time in five months attributed to weaker customer demand that was linked to a slowdown in global trade volumes.

“April data illustrates another loss of momentum for the manufacturing sector, following the sharp slowdown in growth seen during the first quarter of 2019. The latest survey indicates that overall business conditions deteriorated to the greatest extent in over three years as manufacturers cut back production and staff hiring in response to weaker sales,” commented Christian Buhagiar, CEO at the Supply Chain Management Association.

The IHS Markit Mexico Manufacturing PMI improved slightly in April, rising from 49.8 in March to 50.1, although remaining challenged. New orders increased domestically, but export orders contracted for the first time since February 2018. Production decreased marginally and was blamed on restrained demand, input shortages and inventory control. A moderate increase in input costs and factory gate charges was noted. Mexican firms, however, remained positive in April, citing product diversification and new opportunities for foreign market entry.

Manufacturing in the United States showed moderate improvement in April with higher levels of new orders, production and backlogs. Order increases were due to product launches and marketing rather than foreign client demand. Many participants highlighted global trade tensions and slowing foreign demand as factors dampening growth. Shortage of available labor slowed job growth in April. The IHS Markit U.S. Manufacturing PMI rose to 52.6 from March’s recent low of 52.4. 

“Although the PMI ticked higher in April, the survey remains consistent with manufacturing acting as a drag on the economy at the start of the second quarter, albeit with the rate of contraction easing,” said Williamson. “Historical comparisons indicate that the survey’s output gauge needs to rise above 53.5 to signal growth of factory production. As such, the data add to signs that the economy looks set to slow after the stronger than expected start to the year.”