Global Manufacturing PMI Hits a 33-Month High in November

“Demand continued to revive following earlier COVID-19 lockdowns, including a further rebound in international trade flows,” said J.P. Morgan and IHS Markit. “There was also a mild increase in employment, as capacity constraints rose and business optimism hit a near six-year high.”

The PMI in the Eurozone slipped one point to 53.8 in November, but indicated a fifth successive month of expansion. Except for the Netherlands and Ireland, PMIs in the zone dipped as demand softened at home and abroad. Germany, however, remained the driver behind the expansion with a PMI of 57.8. Export orders remained strong in Germany, the Netherlands and Austria.

Input prices rose sharply in November resulting in a second consecutive month of higher output prices. Supply chain delays and an increase in production and backlogs contributed to low inventories at firms and warehouses. Employment levels fell for the 19th month, but business confidence improved.

“Eurozone manufacturing output continued to grow at a decent pace in November,” said Chris Williamson, chief economist at IHS Markit. “Although the rate of expansion cooled from October’s 32-month high amid new lockdown measures, the sustained expansion should help to soften the economic blow of COVID-19 restrictions, which have hit the service sector hard. The survey therefore adds to evidence that the region will avoid in the final quarter of the year a similar scale of downturn recorded in the second quarter.”

China manufacturers expressed optimism in November. Production and new orders accelerated to a 10-year high, elevating the Caixin China General Manufacturing PMI to 54.9. Growth was due primarily to domestic demand, which pressured capacity and increased backlogs. Input buying rose at the fastest rate since January 2011. Prices for raw materials, especially metals, jumped during the month resulting in higher factory gate prices.

“We expect the economic recovery in the post-epidemic era to continue for several months. At the same time, deciding how to gradually withdraw the easing policies launched during the epidemic will require careful planning as uncertainties still exist inside and outside China,” said Dr. Wang Zhe, senior economist at Caixin Insight Group.

Russia is still having difficulty recovering from 2020’s dismal business conditions. After a brief rise into expansion territory, the PMI is back at 46.3 in November, down from 46.9 in October. New orders fell sharply as domestic demand was stifled by ongoing COVID-19 restrictions. New export orders, however, rose at their fastest rate since December 2018. Production fell at its steepest rate since May and contributed to faster declines in employment. Higher input prices were blamed on raw material shortages and unfavorable exchange rates and were partially passed on to clients. IHS Markit expects industrial production in Russia to contract by 5.1 percent in 2020.

Manufacturers in Mexico saw deteriorating business conditions in November as new orders, exports, production, input buying and employment numbers continued to fall. The Manufacturing PMI stayed in contraction at 43.7, increasing only 0.1 point from October. “Anecdotal evidence provided by survey members largely linked the deterioration in the health of the sector to the COVID-19 pandemic and controls imposed to stop the disease from spreading,” said Pollyanna De Lima, economics associate director at IHS Markit. “Many firms associated the downturn in sales with their clients’ businesses being closed.” Manufacturers were pessimistic about the future outlook. IHS Markit said a recovery for the sector seems unlikely in the near-term.

Manufacturing conditions in Canada contrasted sharply with those in Mexico. The PMI moved up to 55.8 in November, extending the nation’s manufacturing recovery to five months. Improving domestic demand was linked to higher production volumes. COVID-19 border restrictions, however, dampened exports and disrupted supply chains. The increase in backlogs and production pushed employment levels higher. Input purchasing rose as inventories quickly depleted during the month, but was accompanied by a sharp jump in input prices. As input costs were passed on to clients, output price inflation soared to a 21-month high. Manufacturers were optimistic about growth once the pandemic ends.

The U.S. manufacturing sector showed notable improvement in November, said IHS Markit, kicking into high gear with faster upturns in production due to strong domestic and foreign demand. The PMI rose to 56.7 from 53.4 in October. Supply chain delays and input shortages put pressure on capacity and higher input costs were passed on to customers. Rising infection rates slowed hiring in November.

“Most encouraging was the breakdown of the rise in new orders, which underpinned the expansion,” commented Williamson. “Although demand for consumer goods remained somewhat subdued, mainly reflecting rising virus infection rates, demand for investment goods such as business equipment and machinery rose especially sharply. The rise in investment spending sends a welcome signal that companies have become more optimistic about longer term prospects, something that was reinforced by a surge in firms’ expectations about production in the year ahead – even in consumer-facing sectors – to the highest since early-2015.

“Confidence was boosted by encouraging vaccine news during the month, auguring well for life returning to normal at some point in the coming year, as well as hopes of increased stimulus spending and infrastructure investment following the election.”