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Worldwide manufacturing drifts

The manufacturing sector turned mildly negative in May, then mildly positive in June, according to a report by Michael Montgomery, U.S. economist for IHS Global Insight. The 2-month average is virtually neutral and the 3-month average is a token plus—all 12-month averages are very close to June readings.

The ISM purchasing managers’ index (PMI) says that U.S. manufacturing is essentially stalled. “The Markit Economics version (constructed in a very similar fashion) says that there is modest growth,” said Montgomery. “From our perspective, taking all the data, that means growth is so sluggish that surveys cannot tell the difference between token gains and flat.”

That means that the manufacturing operating environment is almost identical to what it has been for most of the last year, with no signs of improvement or deterioration, according to Montgomery. “Similar conditions of near stagnation exist overseas, with Europe on the underwater side of neutral but clawing back toward neutral, China just under neutral, and only Japan showing any signs of a recovery that is gaining momentum,” he said. “Worldwide manufacturing is stuck in the mud.

Montgomery noted that the PMI bounced back over 50 to 50.9 in June from 49.0 in May. New orders tallied 51.9 and production scored 53.4, both just over 50.

Posted July 1, 2013

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