Global Manufacturing Recession Started: Trump's China Tariffs Made Matters Worse
The Markit Global Manufacturing PMI is in the third month of contraction.
- The downturn in the global manufacturing sector extended into its third consecutive month in July. Production and new order intakes declined further, as conditions in many domestic markets remained soft and international trade volumes continued to contract. These negative trends filtered through to the labour market, resulting in another round of job losses.
- At 49.3 in July, a tick below June’s reading of 49.4, the J.P.Morgan Global Manufacturing PMI™ signaled contraction for the third straight month and fell to its lowest level since October 2012.
- Of the 30 nations for which July data were available, 19 had Manufacturing PMIs signalling downturns. China, Japan, Germany, South Korea, Taiwan, France, the UK, Italy and Brazil were among the countries seeing contractions.
- Although the US and Canada saw expansions, their respective PMI levels (50.4 and 50.2) were only marginally above the neutral 50.0 mark.
Germany PMI Worst in 7 Years
Conditions in Germany's manufacturing sector showed the greatest deterioration for seven years in July, according to the latest PMI® data from IHS Markit and BME, led by the steepest drop in new export orders since 2009. Output also fell at a faster pace, with manufacturers making more aggressive cuts to employment and purchasing activity.
Eurozone Manufacturing Worst Since 2012
▪ Final Eurozone Manufacturing PMI at 46.5 in July (Flash: 46.4, June Final: 47.6)
▪ Output and orders both down markedly as confidence hits lowest since December 2012
▪ Sharpest recorded reduction in employment for over six years
China PMI in Contraction
Markit reports stable conditions with the PMI in Slight Contraction.
At 49.9 in July, the headline seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide asingle-figure snapshot of operating conditions in the manufacturing economy – posted only fractionally below the neutral 50.0 level to signal broadly stable conditions across China’s manufacturing sector. This followed a marginal deterioration in the health of the sector during June (PMI reading of 49.4).
US Flirting with Contraction
Earlier I commented on conditions in the US noting ISM and Markit PMI On Verge of Contraction.
My expectation is that the US would contract next month. See link for my reasons.
And this was before Trump threw a monkey wrench into the manufacturing setup with another extremely tariff hike on China. In the Lie of the Day, Trump Hikes China Tariffs By 10%, Says "Trade Talks On Track"
In response to Trump's move Bond Yields Crashed and Inversions Strengthened.
Don't Expect a Recession Warning
If you think you are going to get a recession warning, you are probably wrong. For discussion, please see Manufacturing Recessions vs Real Recessions: How Much Lead Time Do You Expect?
Mike "Mish" Shedlock