Global manufacturing slump deepens, supply-demand imbalances fade

Global manufacturing PMI further down, driven by DMs

The manufacturing PMIs for November published over the past week point to a further contraction in global industry. The global manufacturing PMI fell further below the neutral 50 mark separating expansion from contraction, to 48.8 (October: 49.4) - the sixth monthly decline in a row. The weakness in November was mainly driven by developed markets (DMs). The aggregate index for DMs dropped by a full point to 47.8 (October: 48.8). Amongst DMs, November readings were below the neutral 50 mark for almost all relevant countries, still being the lowest in the eurozone and the UK, despite an uptick compared to October.

Meanwhile, for the US (Markit) and Japan, the index also fell below the neutral mark for the first time since June 2020 and January 2021, respectively. The aggregated index for emerging markets (EMs) more or less stabilised at 49.7 (October: 49.8). That was partly thanks to a slight uptick in Caixin's manufacturing PMI for China (which is included in the EM aggregate), although pandemic headwinds drove China's official PMI published by NBS further into contraction territory - to a 7-month low of 48.0.

Global supply-demand imbalances for goods continue to fade

The various components of the global manufacturing PMI show that the weakness is quite broad-based, with both the output (47.8) and orders (46.8) sub-indices falling deeper into contraction territory. The exports sub-index stabilised at a low 46.2, still indicating a significant slowdown in global trade. All in all, demand indicators continue to be weaker than supply indicators at the moment. This is also illustrated by our global supply bottlenecks index, which fell back to around the neutral level in November. The ratio between EM output and DM demand indicators has been an important driver of this, but supply bottlenecks indicators captured in our index also point to a further easing. For instance, the benchmark for global container tariffs has fallen back by more than 75% compared to its peak reached a year ago.

The components of our index that measures delivery times for manufactured goods, electronic equipment and semiconductors also continue to normalise. All in all, our index (which does not cover idiosyncratic supply shocks in energy and other commodity markets, nor labour market tightness) shows that imbalances in the global supply of and demand for goods have eased to a large extent, thereby mitigating the rise in global cost push price factors. In line with this, the global PMI subindices for input and output prices continued their slide in November, which is consistent with the broader easing in global pipeline inflationary pressures observed recently.