Manufacturing is a central cog in the growth frame and declining growth rates should be a cause for concern. Today’s Markit flash PMI’s for the US, Japan and Europe showed continued deterioration in manufacturing fundamentals:
US Manufacturing– ““US factories reported their worst month for just over six-and-a-half years in April, dashing hopes that first quarter weakness will prove temporary. “Survey measures of output and order book backlogs are down to their lowest since the height of the global financial crisis, prompting employers to cut back on their hiring. “The survey data are broadly consistent with manufacturing output falling at an annualized rate of over 2% at the start of the second quarter, and factory employment dropping at a rate of 10,000 jobs per month.”
Japan Manufacturing – Manufacturing conditions in Japan worsened at a sharper rate in April. Both production and new orders declined markedly, with total new work contracting at the fastest rate in over three years. The sharp drop in total new work was underpinned by the fastest fall in international demand since December 2012, and following the two earthquakes on the island of Kyushu (one of Japan’s key manufacturing regions), the outlook of the goods-producing sector now looks especially uncertain.”
Euro Zone Composite – ““The eurozone economy remains stuck in a slow growth rut in April, with the PMI once again signalling GDP growth of just 0.3% at the start of the second quarter, broadly in line with the meagre pace of expansion seen now for a full year. “A failure of business expectations to revive following the ECB’s announcement of more aggressive stimulus in March is a major disappointment and suggests that the modest pace of growth is unlikely to accelerate in coming months. “France continues to act as a major drag on the region, with goods exports slumping to the greatest extent for over three years. Germany and the rest of the region are enjoying more robust expansions by comparison, though growth rates slowed in April. “
The US data followed on the heels of weak industrial/manufacturing production for March and a weakening Chicago Fed National Activity index.
US manufacturing remains in a long term funk: the last time we had such weakness in the US was during the depression and the post war adjustment.
Monthly rates of change in manufacturing show weakness on both a monthly and smoothed trend basis:
Motor vehicle assemblies look to have peaked and supports recent weakening in retail sales;