The global manufacturing PMI has continued its decline in September. There was a small improvement in Canada and the US but the euro area recorded a further decline, with data dropping in France, Germany and the Netherlands. The index was also down in China whereas India, Indonesia and Vietnam are holding up well.
The situation deteriorated significantly in terms of new orders. It is particularly bad in the euro area and the UK although the negative environment is now very broad-based across countries. Orders were down in Japan and China as well, whereas Indonesia saw an improvement.
Despite the low readings for the overall index and in particular the new orders component, the employment survey continues to show some resilience. Further declines are to be expected considering the worsening of the order book data.
In terms of inflation dynamics, the percentage of companies confronted with higher input prices continued its downward trend in Canada and the US but rebounded strongly in the euro area, the UK and Japan. This is probably related to currency developments (depreciation) but it will be monitored closely by central banks.
The developments in terms of output prices tend to be positively correlated with those in input prices so, unsurprisingly, many countries experienced a rebound in output prices in September (US, euro area, several countries in the euro area, United Kingdom, Japan, etc.). Central banks and financial markets are eagerly awaiting the October data to see whether the rebound is confirmed. In such case, it would push higher the expectations about the peak level of policy rates.
On the other hand, delivery times continue to get shorter, which points towards an easing of supply side tensions. Finally, the services PMI has seen a huge rebound in the US, after the big drop in August. In the euro area however, the decline continues and at 48.8 the index is now well below the crucial 50 level. Data in France improved versus August, but Germany recorded a big drop.
