Global manufacturing PMI shows modest recovery in January

Global manufacturing PMI rises for first time in a year, but remains in contraction mode

Last week, the January manufacturing PMIs were published for a wide range of developed markets (DMs) and emerging markets (EMs). After having dropped continuously over the past year, from 53.7 in February 2022 to 48.7 in December 2022, the global manufacturing PMI rose by 0.4 points to 49.1 in January, although remaining below the neutral 50 mark separating expansion from contraction. The improvement in January mainly came from DMs, for which the aggregated index rose to 48.1 (December: 47.3). The EM aggregate was more or less stable at a level just below the neutral mark (49.9, versus 49.8 in December).

Among DMs, January readings did improve for the US (Markit, whereas the ISM index dropped), the eurozone and the UK, although for all countries/regions remaining clearly below 50. Among EMs, Caixin’s manufacturing PMI for China (included in the EM aggregate, with a stronger focus on private, exporting firms) only improved marginally, while the ‘official’ version published by NBS (with a stronger coverage of large, public enterprises) showed a more material rise, to 50.1 (December: 47.0). This suggests that the fall-out from the messy Zero-Covid-exit in terms of renewed (production) disturbances, that was clearly visible in December, has faded. The EM picture is quite divergent: the January manufacturing PMIs for India, Indonesia and Russia were clearly above the 50 mark, while those for Taiwan, South Korea and Brazil were still clearly below that level.

Weakness still concentrated on the demand side

The various subcomponents of the global manufacturing PMI show improvements on both the supply and the demand side. Still, the subindices for output, domestic orders and export orders all remain clearly in contraction mode, with weakness concentrated on the demand side. On the supply side, the global output component rose to a five-month high of 49.0 (December: 48.5), while the future output component climbed to a 10-month high of 62.3 (December: 60.0). On the demand side, the domestic orders component rose by 1.3 points to 47.8 in January, while the export sub-index went up to 47.5 (from 46.2 in December).

Delivery times almost back to pre-pandemic levels

A remarkable improvement came from the global delivery times subindex, which reached a post-pandemic high of 49.0 in January (and is now close to its 2019 average of 49.5). This confirms the further fading of bottlenecks in global supply chains for industrial goods. This subindex is also one of the ingredients of our global supply bottlenecks index. This indicator captures other global PMI components as well, next to global shipping costs and lead times for semiconductors and other electronics. Our index shows that global supply bottlenecks and global supply/demand imbalances for goods have clearly faded over the past half year. This has not only been a result of fading bottlenecks in global supply, but also of a clear slowdown in global demand – as indicated by the ratio between EM output conditions and DM demand conditions.