Supply Chain Matters provides highlights of February 2023 reported global and regional PMI indices which appear to indicate some stabilization within global supply chain networks. Such a state can imply a breather, a turning point, or pending fundamental shifts.


Global Manufacturing Activity Levels

Global manufacturing activity as reported by the J.P. Morgan Manufacturing PMI®, compiled by S&P Global in association with ISM and IFPSM, halted a consecutive five-months of contraction levels to that of no-change.  The reported 50 value for February was up 0.9 percentage points from the value of 49.1 reported for January.

The overall theme depicted by the authors in the February 2023 reporting  was that of a return to growth, in that global output levels rose for the first time in seven months. Further noted were signs of increased manufacturing employment and slower rates of decline in both new business and stocks of purchases.

That stated, February’s activity appears to have regional specific connotations with upturns in production volumes across areas of Asia, specifically the ongoing re-opening of China’s manufacturing sector, and upturns in India, the Philippines and Thailand manufacturing and supply chain activity levels. In contrast, performance levels related to North America, Europe and South America were noted as remaining weak, on average, compared to Asia.

From our lens, a more optimistic indicator was the report pointing to average supplier lead times shortening for the first time since July 2019.  However, commenting on the February data, Bennett Parrish, Global Economist at JP Morgan indicated in-part: “While the disruptions of the past year continue to fade, the output price PMI has been stuck at an elevated level this year and somewhat raises the risk of goods inflation becoming entrenched.”


February 2023 PMI trend


Highlights of Regional Reporting


The S&P Global Eurozone Manufacturing PMI® fell slightly in February to 48.5, 0.3 percentage points below January’s value of 48.8. Manufacturing output volumes reportedly stabilized, after an eight month run of contraction. Counties reaching new highs were noted as Italy, noted as reaching a ten month high, Greece, Ireland and Spain. Countries experiencing sequential monthly lows were noted as France, Austria and Germany, the latter recording a 46.3 PMI value in February, the eighth consecutive month of contraction reporting.

United States

Two indices of U.S. manufacturing activity levels pointed to continued contraction in February. The S&P Global US Manufacturing PMI® had a February value of 47.3, up slightly from 46.9,reported for January.  The report authors indicated that the rate of contraction was little changed from that in January. Lower volumes were attributed to de-stocking activities among customers while export demand also weakened during the month.

The February 2023 Manufacturing ISM® Report on Business®  recorded a value of 47.7 for February, 0.3 percentage points above the January value of 47.4. The report noted that in the last two months, PMI levels have been at their lowest levels since May 2020. Once more, the New Orders Index contracted for the sixth consecutive month. On a positive note, the Supplier Deliveries Index improved for the fifth consecutive month.


The two recognized indices of PMI within China each swung toward growth levels in February.

The Caixen China General Manufacturing PMI®, a reflection of either private and SMB businesses recorded a value of 51.6 for February, reflecting a 2.4 percentage point increase from January. The report authors noted that although modest, February’s value marked the first improvement in seven months. Further indicated was that the recent easing of Covid-19 restrictions measures and recovery of operations and customer demand underpinned February’s increase in production levels.

China’s official PMI index compiled by country’s Statistics Bureau and weighted toward state-owned manufacturers recorded its highest reading since April 2012 at a reading of 52.6 for February. The report’s government centric authors pointed to the production sub-index rising to 56.7 in February, increasing 6.9 percentage points from the previous month, indicating that manufacturing production activities have accelerated significantly. The new orders sub-index was reported as 54.1, increasing 3.2 percentage points from the previous month, and noted as an indication that the market demand of the manufacturing industry continued to increase.


Taiwan’s activity as reflected in the S&P Global Taiwan Manufacturing PMI® showed its best performance since June 2022, rising 4.7 percentage points to a value of 49 for February. Reportedly, production levels fell at a modest pace and was the weakest in ten months. Previous monthly downturns in export orders likewise eased during the month. Authors further observed that the island’s supply chains moved close to stabilization with average input lead times: “lengthening to the weakest extent in 43 months.”


While the S&P Global India Manufacturing PMI® was little changed at a value of 55.3 for February, the report pointed to the country’s manufacturers experiencing a continued increase in new work. This upturn reportedly stretched the sequence of production level growth to 20 months. Report authors however, qualified that the domestic market demand was the prime source of activity growth. In December output growth achieved a 13 month high, the fastest rate in new orders since February 2021.


The S&P Global Vietnam Manufacturing PMI® returned to expansion level with a reported value of 51.2 for February compared to January’s value of 47.4. Panelists reportedly pointed to solid increases in new business, the sharpest since August of last year. New export orders reportedly rose for the second month running reflective of what was noted as: “a brighter international demand environment.” That stated, the rate of input cost inflation was noted as rising for the sixth consecutive month reaching its highest levels since June 2022.


Supply Chain Matters Added Insights and Perspectives

In our published Supply Chain Matters highlights commentary reflective of January PMI activity levels, we indicated that global PMI data provided some cause for optimism in the notion of any added contraction among global supply networks but should be taken in context. We believe the same perspective can be made with the February data.

The indicators for longer-term sustained momentum remain subdued and despite some reports in business, industry or supply chain focused media that the worst is over, readers should be very watchful of the trending that continues over the next several months. So should the notions that China is back and on a tear.

From our lens, the key interpretation right now is stabilization, in other words, the bleeding has possibly coagulated. We suspect, without further hard evidence, that the shifting production numbers involving countries across Asia may be more reflective of industry supply network moves toward China Plus supply network resiliency moves. We addressed that movement in our prior highlights of latest China Business Climate Survey Report from the American Chamber of Commerce of China. The trending likely involves industry-specific dimensions, a good example being high tech and consumer electronics supply network resiliency needs. Likewise, consumer goods related industry segments would want to believe that inventory over hangs are being resolved and that inventory replenishment buying cycles are soon in the cards.

The reality is that for the most part, product demand levels in the coming months remain uncertain given inflation stressed consumers and businesses, and continued geo-political developments. The consensus seems to hover on a belief that the second half of this year will present more normalcy, but in qualified dimensions.

The takeaway for this particular commentary is that every business has to develop its own assessment of the global supply chain landscape relative to demand and supply trending, along with various business and supply chain risk factors.

Planning is an art as well as a science.


Bob Ferrari

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