Global manufacturing PMIs - The calm before the storm

Global Macro: PMI up in February, but conflict impact not fully captured

Over the past few days, manufacturing PMIs for February were published for a wide range of developed markets (DMs) and emerging markets (EMs). After a significant drop in January, the headline global manufacturing PMI for February edged up by 0.4 point to 53.6. The improvement was driven by EMs, with Caixin’s PMI for China rising back to above the neutral 50 mark (by 1.3 point, to 50.4). The global PMI corrected for delivery times picked up even more, by 0.8 point to 52.5. The subindex for delivery times improved by 1.3 points although remaining at relatively low levels (39.3, and for developed economies 30.7). However, crucially the latest PMI surveys will not have fully captured the impact of the Russia-Ukraine conflict, that escalated sharply at the end of February.

Fading of supply bottlenecks delayed, price pressures up

In line with our expectations, the spread of Omicron in late 2021/early 2022 seems to have contributed to a stalling in the easing of supply and demand imbalances. After pointing to some easing of these disturbances in late 2021, our global supply bottlenecks index edged up a bit again in early 2022, driven by a turnaround in the output versus orders and backlogs components, as well as the Baltic Dry Index. We should add that this global index does not capture variables related to the current scarcity in commodity markets, which can be volatile and idiosyncratic in their drivers. The recent spike of a wide range of commodity prices (energy, food, metals) following the escalation of the conflict in Ukraine is a reflection of major supply issues in these markets. This will add to global inflationary pressures. While the global PMI subindices for input and output prices edged up only marginally in February, this distress in commodity markets and passthrough effects will likely drive these subindices for cost price push inflation higher the coming months.