# Manufacturing surveys: What do they tell us about the health of the global economy? Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2017-08-08 Category: INVESTING Category URL: https://financedigest.com/category/investing Meta Title: Global Manufacturing Growth Review: July 2018 Update Meta Description: Explore the latest insights on global manufacturing trends, including the softening growth at the margin and the shift in performance between economies. Gain URL: https://financedigest.com/manufacturing-surveys-what-do-they-tell-us-about-the-health-of-the-global-economyhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/earth-globemkvzi5bo-1-1736843611830-compressed.jpg) By **Graham Bishop,** Investment Director at Heartwood Investment Management July’s readings of the Markit Purchasing Manufacturers’ [Surveys](https://www.financedigest.com/uk-construction-growth-hits-14-month-high-in-april-pmi-survey-shows.html) (PMIs) offered no real standout surprises. However, they seem to support our view that global growth is softening at the margin in the second half of this year, and that we are seeing less synchronised performance between economies. In fact, the improvement in global [manufacturing](https://www.financedigest.com/asian-factory-activity-expands-in-may-on-robust-global-demand.html) over the [last year](https://www.financedigest.com/crypto-investors-step-up-risk-management-after-last-years-meltdowns.html "Crypto investors step up risk management after last year’s meltdowns") may now have reached its cyclical peak. Our analysis shows that fewer [countries are making a positive contribution to global manufacturing](https://www.financedigest.com/global-automotive-fuel-nozzle-market-by-manufacturers-countries-type-and-application-forecast-to-2031.html "Global Automotive Fuel Nozzle Market By Manufacturers, Countries, Type And Application, Forecast To 2031") growth, a trend that has been building since March. Only 30% of individual countries saw accelerating [growth rates](https://www.financedigest.com/food-grade-phosphates-market-regional-industry-segmentation-analysis-by-production-consumption-revenue-and-growth-rate-by-2027.html "Food Grade Phosphates Market Regional Industry Segmentation, Analysis by Production, Consumption, Revenue and Growth Rate by 2027") in July compared with nearly 80% of countries at the end of last year (based on the index change over the last three months). **Percentage of [countries with faster rates](https://www.financedigest.com/ecb-hikes-rates-throws-lifeline-to-indebted-countries.html "ECB hikes rates, throws lifeline to indebted countries") of manufacturing activity (3-month change)** ![Source: Markit Purchasing Managers’ Surveys, Bloomberg](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/chart-1-1736843611676-compressed.jpg) Source: Markit Purchasing Managers’ Surveys, Bloomberg There also appears to be more dispersion at the individual country level. Manufacturing [surveys](https://www.financedigest.com/uk-construction-growth-hits-14-month-high-in-april-pmi-survey-shows.html) in the last three months show that developed economies are now outperforming emerging economies – a situation that contrasts with earlier in the year when we saw a higher degree of synchronisation in [global growth](https://www.financedigest.com/global-growth-headed-down-as-inflation-surge-to-endure.html "Global growth headed down as inflation surge to endure"). Emerging economies, especially the commodity exporters and to a lesser extent China, are contributing to this divergence. In the case of China, there remains a discrepancy between the official and ‘unofficial’ [manufacturing](https://www.financedigest.com/asian-factory-activity-expands-in-may-on-robust-global-demand.html) surveys, which we monitor closely. Even among developed economies, though, we are seeing wider levels of dispersion at the country level. Much of the [developed world’s](https://www.financedigest.com/brand-metrics-partners-with-xite-to-develop-world-first-ctv-measurement-solution.html "Brand Metrics partners with XITE to develop world-first CTV measurement solution") current outperformance is attributable to the Eurozone members, while the UK is one of the weakest countries and the US is plateauing. Manufacturing [surveys](https://www.financedigest.com/uk-construction-growth-hits-14-month-high-in-april-pmi-survey-shows.html) are of course a proxy and do not [tell the whole](https://www.financedigest.com/are-your-it-team-telling-you-the-whole-truth.html "Are your IT team telling you the whole truth?") story about general economic conditions. However, they are an [important barometer of overall business sentiment](https://www.financedigest.com/u-s-inflation-outlook-brightens-as-import-prices-fall-consumer-sentiment-rises.html "U.S. inflation outlook brightens as import prices fall, consumer sentiment rises") and, as we saw in 2015, the health of manufacturing can have important ramifications for the broader [economy.](https://www.financedigest.com/shocks-in-g20-emerging-economies-hit-rich-world-growth-imf-says.html) We do not yet [consider this moderation in activity to be overly concerning](https://www.financedigest.com/paris-considers-electric-scooter-ban-over-safety-concerns.html "Paris considers electric scooter ban over safety concerns"). Moreover, it is only to be [expected that some of the froth has evaporated from the elevated readings seen earlier this year](https://www.financedigest.com/u-s-consumers-inflation-expectations-highest-in-8-years-ny-fed-says.html "U.S. consumers’ inflation expectations highest in 8 years, NY Fed says"). For now, we believe that these slower [rates of expansion signal](https://www.financedigest.com/stocks-shed-gains-treasury-yields-jump-as-fed-signals-rate-hikes-could-come-soon.html "Stocks shed gains, Treasury yields jump as Fed signals rate hikes could come ‘soon’") the transition from a cycle of [manufacturing](https://www.financedigest.com/asian-factory-activity-expands-in-may-on-robust-global-demand.html) improvement and recovery to one of stabilisation. There is, though, one important caveat. The marginal softening in global manufacturing, and perhaps broader economic momentum, is occurring at a time when [central banks](https://www.financedigest.com/central-banks-opt-for-shock-and-awe-to-tame-inflation.html "Central banks opt for shock and awe to tame inflation") are considering removing monetary policy accommodation. While we believe the current environment remains [supportive to risk assets](https://www.financedigest.com/adverty-releases-unity-sdk-4-0-with-2d-games-support-and-a-refreshed-suite-of-high-quality-ad-assets-for-the-ultimate-in-game-advertising-experience.html "Adverty releases Unity SDK 4.0, with 2D games support and a refreshed suite of high-quality ad assets for the ultimate in-game advertising experience") and corporate fundamentals, we are starting to take a more cautious view further out as policymakers continue to normalise monetary conditions. In consequence, we believe that it is prudent to begin [reducing risk](https://www.financedigest.com/driving-returns-and-reducing-risk-with-data.html "Driving returns and reducing risk with data") in portfolios incrementally. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---