GLOBAL MACRO: PMI Points To Slowing Global IP And Trade Flows

Given how interconnected global supply chains are, it is not surprising that the ASEAN S&P Global manufacturing PMI showed a sharp drop in export orders since the global PMI showed the manufacturing sector contracted at a slightly faster pace in August. The JP Morgan global PMI fell to 49.5 from 49.7 in July, the second straight month below 50, signalling that the slowdown in global IP growth begun in Q2 likely continued into Q3.

• The US, Japan, and EU all posted PMIs showing that manufacturing is contracting, while China returned to positive territory and ASEAN and EM as a group showed moderate growth. Indian industry is growing strongly with the PMI at 57.5 in August. 
• JP Morgan observed that the manufacturing slowdown was driven by contracting production, orders and employment. Export orders fell for a third straight month and at the fastest pace since December suggesting that global trade flows are likely slowing.
• Global input cost inflation picked up which JP Morgan believes is due to higher shipping costs, which have been boosted by rerouting around southern Africa and away from the Red Sea due to attacks. Some of this increase was passed onto customers.
• Manufacturers are pessimistic re the outlook with confidence in August weak and staying below its historical average, which is reflected in continued inventory drawdowns.
• The drop in production was driven by capex and intermediate goods, while consumer goods posted moderate growth. However, new orders fell in all three categories. 

Global growth