Global manufacturing index declines for the first time since 2020

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Business conditions in the global manufacturing sector have made a gloomy turn in September, according to JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI).

Compiled by S&P Global, the PMI report showed that market activity dropped from 50.3 in August to 49.8 in September, marking the first time the headline index slipped below the neutral level of 50.0 points since June 2020. 

The survey’s sub-indices attributed the decrease to the deteriorating production trend amid an intensifying downturn in global trade flows, the subdued demand linked to the ongoing cost-of-living crisis, and the growing economic uncertainty about outlook. 

In a statement, IHS Markit cited one positive result that came from the easing of supply chain delays, which were largely due to cooling demand. 

The survey’s Output Index, which serves as an advanced indicator of actual worldwide output trends, predicted a second-successive monthly drop in worldwide factory production in September. 

Other survey indices have also been signalling a worsening of the production trend in recent months and remained significantly low in September. 

The rate of decline has also accelerated to the fastest since April 2022, when lockdowns in China disrupted global production growth. The latest decline was also the steepest recorded since the euro area debt crisis of 2012. 

The combination of cooling final demand and reduced inventory building is in turn leading to a deteriorating production outlook, which manifested itself in September with a sharp drop in future output expectations among global manufacturers. 

The PMI also reported how business optimism is now running at its lowest since May 2020 and is especially weak in terms of its comparison to long-run trends in the Eurozone, the UK and China.