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Now that we’re down to the last trading weeks of the year, I figure it’s as good time as any to check how global manufacturing industries have fared so far this year. We’re checkin’ the manufacturing PMIs, yo!

But first, what the heck is a manufacturing PMI?

A purchasing managers index (PMI) is just a survey conducted among a few hundred purchasing managers in the manufacturing sector. Respondents are usually asked for opinions on issues such as employment, inventory levels, new orders, and state of production and supplier deliveries.

Traders watch PMIs because they act as leading indicator for the manufacturing sector, and because many central banks consider PMI readings in their monetary policy decisions.

An index reading of 50.0 and above hints at optimism among the manufacturers, which could lead to industry expansion. Consequently, a reading of 49.9 and below denotes pessimism and a possible contraction in the manufacturing sector.

Data provider Markit prints PMIs that are used by some central banks, so I’ll mostly rely on their data. I also got New Zealand’s numbers from BusinessNZ; Switzerland’s reports from Procure, and China’s data from the China Federation of Logistics & Purchasing (CFLP).

For everything else, there’s Mastercard (or so I heard.)

So, how are the manufacturing industries of major economies doing so far this year?

Now THAT’s a chart! See a trend yet? How about a bird? A plane? Waldo?

Let’s break down the PMI charts per region and see what the most recent reports are saying:

North American Economies

  • ISM’s U.S. PMI contracted for a third straight month in October. Demand and consumption contracted, while near-term growth sentiment remains “cautious,” as managers watch for global trade updates.
  • Markit’s U.S. PMI
    hit its highest since April, and the three consecutive increases hinted that the soft patch has “bottomed out.” Still, respondents are worried about “tariffs, the auto sector’s ongoing malaise, a lack of pricing power amid weak demand and uncertainty about the economic and political situation over the coming year.” For now, Markit paints a picture of “guarded optimism.”
  • Canada’s October reading represents the second consecutive month above 50.0 and the highest since February. Markit noted the “change of fortunes” for the month, as higher domestic demand pushed output to its eight-month highs even as exports remain sluggish amidst weaker global trade conditions.

European Economies

  • Eurozone’s PMI hit a three-month high in November, as declines in output and new orders slowed down and optimism reached five-month highs. However, Markit also added that “manufacturing remains in its deepest downturn for six years amid ongoing trade woes,” and that its weakness is “spilling over to services” via employment growth.
  • Slower declines in production and international demand helped push Germany’s PMI to a five-month high in November. Markit noted that “manufacturing remains firmly in contraction,” but that indicators are “moving in the right direction and it would seem the worst of the downturn is over barring any shocks.
  • U.K.’s manufacturing PMI dipped to a two-month low in November, as Brexit and general election uncertainties weigh on output and orders. A reversal of customers stockpiling ahead of the October 31 Brexit deadline also didn’t help November’s production volumes.
  • Markit shared that the survey’s “worst spell since the recession of 2008-9” has put the economy “on course for a 0.2% drop in GDP in the fourth quarter,” and “into territory that would normally be associated with the Bank of England adding more stimulus.
  • Switzerland’s PMI jumped to a seven-month high in October. Production and orders increased the most, though all five sub-indices contributed to a higher reading.

Asian and Australian Economies

  • Japan’s PMI printed below 50.0 for a seventh month in a row in November. Markit noted that a “contraction in Q4 seems highly likely” since the service sector is not making up for risks of lower export demand, U.S.-China trade war, and “limited policy levers.”
  • Australia’s PMI dipped back into contractionary territory in November. Output fell for a third straight month; new orders declined by its fastest in 43 months, and business sentiment dropped to a 41-month low.
  • After three months of contraction, New Zealand’s PMI expanded in October and marked its fastest increase since April. Higher new orders and production and falling inventory suggest that the PMI’s jump has underlying strength.
  • China’s (official) PMI clocked in its sixth contraction in a row in October. 11 out of 13 sub-indices showed lower readings, with new orders falling into contraction; new export orders dropping faster, and production growth slowing down.
  • Caixin’s PMI noted that October’s numbers represent “the strongest improvement in operating conditions” since February 2017. Domestic and foreign demand both improved “substantially” and new orders hit their highest since February 2018 thanks to the U.S. exempting more than 400 types of Chinese products from additional tariffs.

So, it looks like weaker domestic data, global demand slowdown, and global trade tensions had taken their toll on manufacturing activity in at least the first half of the year.

But the combo of interest rate cuts, positive trade developments, and in some cases resilient labour market have led to green shoots for most of major economies’ manufacturing sectors.

Unless global trade negotiations deteriorate or global demand dips further, we’ll likely see many of these PMIs slowly edge higher in the coming months.