Global manufacturing strengthens as 2024 starts

Global manufacturing PMI rises by a full point in January

Over the past week, January manufacturing PMIs for various developed markets (DMs) and emerging markets (EMs) were published. After having dropped by 0.3 points in December (to 49.0), the global manufacturing PMI rose by a full point to the neutral level of 50 which separates expansion from contraction. This improvement was mainly driven by DMs: the aggregate DM index improved by almost two full points, to 48.9, although remaining below the neutral mark. The EM aggregate index rose marginally by 0.2 points to 51.1, but remained above the neutral mark. Amongst DMs, the improvement was particularly strong for the US and the eurozone. The manufacturing PMI for the eurozone rose by 2.2 points to 46.6, although remaining well below the 50 mark. Germany also showed an improvement of 2.2 points (to 45.5), and the Netherlands even 4 points (to 48.9), although for both countries the index remained in contraction territory. Amongst EMs, China’s manufacturing PMI published by Caixin – which is included in the EM aggregate PMI – was stable at 50.8. Its ‘official’ equivalent from NBS picked up a bit, but at 49.2 remained below the neutral mark.

The pick-up of the global manufacturing PMI in January is in line with our expectation of a bottoming out in global manufacturing this year. Reflecting our growth views for the key economies (US, eurozone, China), ongoing US resilience (see here) and some stabilisation in China (see here) will help this bottoming out, although all in all we still deem a very sharp rebound unlikely at the moment.

Significant improvements in the demand side

Looking at the various subindices of the global manufacturing PMIs, there was a significant improvement in the demand side this time. The orders component rose by 1.2 point to a 19-month high of 49.8. The export orders component also rose to a 19-month high, to 48.8 (December: 48.0), although remaining in contraction territory. The output component rose by 0.9 point to an 8-month high of 50.3 and is back above the neutral mark. Despite the improvements on the demand side, supply conditions currently still look a bit stronger than demand conditions, which is keeping inflationary pressures in check. This is also reflected in our global supply bottlenecks index, which remains in ‘supply abundance’ territory.

Is the recent sharp rise in container tariffs (almost) over yet?

Meanwhile, the global component for delivery times dropped to a 13-month low of 48.9 in January, indicating somewhat longer delivery times in supply chains. This seems to be related to the recent disturbances in the Red Sea and the Panama Canal (see our Global Monthly here). That said, the recent surge in container tariffs resulting from these disturbances seems to have (almost) come to an end, at least for now (see chart). Looking more broadly at industrial cost price pressures: although the input price and output price components of the global manufacturing PMI have clearly stopped falling since mid-2023, and have risen back to above the neutral mark since then, they remain well below their peaks seen during 2021 and 2022. All in all, these ‘bellwether components’ currently do give a warning signal for a rise in industrial goods prices, but not a very strong one.