Global Manufacturing Rebound Could Be Unsustainable, Experts Warn

China’s manufacturing sector expanded at a solid pace in August, according to a private survey. We continue to see an improvement in Britain and the rest of Europe, but concerns are emerging about the sustainability of the recovery. PMI surveys measure growth in activity over the previous month, so while we are now seeing a recovery after the lockdowns are lifted, employment figures suggest the outlook is mixed.

Caixin China’s Overall Manufacturing PMI rose for the fourth consecutive month from 52.8 in July to 53.1 in August, the highest reading since January 2011. Manufacturers posted the first increase in new export sales since December 2019, as demand began to pick up abroad and employment was stuck in negative territory for the eighth month in a row, but approached stabilization. Caixin’s results beat analysts’ expectations and also contrasted with official government PMI data, which also showed expansion but at a slower pace.

UK manufacturing production increased at the fastest pace since May 2014. PMI at 55.2 in August, down from 53.3 in July. However, experts warn that it may not yet be the time to celebrate. “The drop in the number of jobs in August makes this feel more like a rebalancing strategy than a real recovery,” warned Duncan Brock, group director at the Chartered Institute of Procurement & Supply. “Businesses are looking to stay in business for the remainder of the year as the challenges of the pandemic recede a bit only to be replaced by an impending Brexit.”

The euro zone manufacturing PMI stood at 51.7 in August, unchanged from July. Divergent trends were observed in the performance of the manufacturing industry; Italy, Ireland, the Netherlands and Germany experienced strong growth, stagnation in Spain and France, and deterioration in Greece. Like Great Britain, job losses continued. “Manufacturing is currently being driven by a pent-up wave of demand, but capacity is shrinking. Data in the coming months will be very important in assessing the sustainability of the recovery,” said Chris Williamson, chief business economist at IHS Markit. . .

India’s manufacturing PMI rose above 50, signaling growth for the first time in five months in August when lockdown measures were lifted. The economy contracted 23.9% year-on-year in the second quarter, according to official GDP figures, making it the main economy most affected.

We also got other official data from the eurozone today. Consumer prices (the inflation rate) fell -0.2% in August, while analysts expected a gain, which is likely to set off deflation alarms at the ECB. Unemployment reached 7.9% in July, compared to 7.7% the previous month.