J.P.Morgan has released its global manufacturing PMI for July and its an unhappy story:
The global manufacturing sector slid further into contraction territory at the start of Q3 2012. At 48.4 in July, the JPMorgan Global Manufacturing PMI™ – a composite index produced by JPMorgan and Markit in association with ISM and IFPSM – posted its lowest level since June 2009. The PMI remained below the neutral 50.0 mark for the second straight month, to signal back-to-back contractions for the first time since mid-2009. Europe remained the main source of weakness during July, while the performances of the US, Brazil and much of Asia were only sluggish at best.
Manufacturing PMIs for the Eurozone and the UK sank to their lowest levels for over three years. Within the euro area, the big-four nations fell deeper into recession, while Greece continued to contract at a substantial pace. Eastern Europe fared little better, with downturns continuing in Poland and the Czech Republic.
The ISM US PMI posted a sub-50.0 reading for the second successive month in July. Rates of contraction accelerated in Japan, South Korea, Taiwan and Vietnam, but eased slightly in Brazil and China. Brighter spots were Canada, India, Indonesia, Ireland, Mexico, Russia and South Africa, which all signalled expansion during the latest survey period.
Manufacturing production and new orders both fell for the second month running in July, with rates of contraction gathering pace. International trade volumes, meanwhile, declined to the greatest extent since April 2009.
Job losses were reported for the first time November 2009. With demand still weak and a sharp drop in backlogs suggesting spare capacity is still available, staffing levels could fall further in coming months.
It’s the last line that is the most important. Business cycle dynamics are taking over from weak growth. By that I mean weak demand is resulting in job losses which further hits demand. There is another negative feedback loop forming between Europe and Asia as declining demand in the former hits exports in the latter and job losses result in both. The US is holding up better but it is still weak.
The July PMIs show a global economy that is in trouble.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
