Supply Chain Matters provides monthly highlight commentary and perspectives on published January 2023 global manufacturing PMI and supply chain activity indices.

Our previous posting in this series of global wide manufacturing PMI highlights was in early January summarizing both December and Q4-2022 reported indices data.


Global Wide Production Activity

The January 2023 J.P. Morgan Global Manufacturing PMI® report, a composite index produced by J.P. Morgan and S&P Global was headlined with global manufacturing output production showing signs of easing at the start of 2023. (Figure below)


JP Morgan Manufacturing PMI history

The January value of 49.1 increased 0.4 percentage points from the 49.7 value reported for the end of 2022. Report authors indicated that rates of contraction in output and new orders both slowed. Sector data reportedly indicated that contraction was centered in intermediate and investment goods while consumer goods output levels rose for a second consecutive month.

The few pockets of production expansion were noted to be within Asia, including India, Indonesia, Thailand and the Philippines.

Of significance was indication that the level of new business fell for the seventh consecutive month.


Select Regional Highlights- Developed Economies


The January S&P Global Eurozone Manufacturing PMI® had a reported value of 48.8, rising one percentage point from the 47.8 value reported for December 2022. Noted by Chris Williamson, Chief Business Economist at S&P Global was that although euro manufacturers continued to report declining output and contracting order books, the picture appeared considerably brighter than the lows seen in October 2022. Further noted was that business optimism about the year ahead has surged higher than over the past three months. That stated, Williamson cautions: “However, demand remains lackluster with few signs of any serious growth drivers on the horizon. The economy has also yet to feel the full impact of higher interest rates which look set to rise further in the coming month, presenting a potentially challenging outlook for economic growth.

Separately, the European Union statistics agency reported that the euro wide economy grew at an annualized rate of 0.5 percent in 2022 which translated to 3.5 percent GDP growth. This has been noted as a faster growth rate than either China or the United States. The U.S. economy reportedly grew 2.1 percent in 2022 while China’s economy reportedly grew 3 percent in 2022.


United States

The January S&P Global US Manufacturing PMI™ posted a value of 46.9 for January, up slightly from the 46.2 value reported for December 2022. Report authors pointed to a solid deterioration in operating conditions across the U.S. manufacturing sector and one that was the second fastest since May 2020.

The separate Manufacturing ISM© Report on Business reported a January value of 47.4, the lowest value since May 2020, one percentage point lower than the 48.4 value reported for December 2022.  Timothy R. Fiore, Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee indicated in part: “The U.S. manufacturing sector again contracted, with the Manufacturing PMI® at its lowest level since the coronavirus pandemic recovery began. With Business Survey Committee panelists reporting softening new order rates over the previous nine months, the January composite index reading reflects companies slowing outputs to better match demand in the first half of 2023 and prepare for growth in the second half of the year. Regarding the leading indicator New Order rates, the report notes: “New order rates remain depressed due to buyer and supplier disagreements regarding price levels and delivery lead times; these should be resolved by the second quarter. In the meantime, panelists’ companies are attempting to maintain head-count levels during the anticipated slow first half in preparation for a strong performance in the second half of 2023.”


The January S&P Global Taiwan Manufacturing PMI® declined from 44.6 in December to 44.3 in January, now signaling eight consecutive months in manufacturing business conditions. According to the report narrative, firms signaled substantial declines in output and new business amid reports of weaker global demand.

Separately, Bloomberg reported that Taiwan’s export orders fell 1.1 percent in 2022,  declining for the first time since 2019 and suggesting added concerns for the country’s trade dependent economy in 2023.


Select Highlights- Developing Regions


The two recognized gauges of China’s manufacturing activity seem to indicate that with the lifting of the country’s zero-tolerance Covid-19 policies, the manufacturing sector may be on the rebound.

The official manufacturing PMI compiled by the country’s Bureau of Statistics reported a PMI value of 50.1 for January,  a significant 3.1 percentage point rise from that of December, indicating a sign of improvement for the first time since September 2022. The reading comes as the country’s manufacturers entered a period of reduced activity because of the celebrations of the Lunar New Year. The report drew some mixed reactions among the country’s economists, and seemed to indicate that larger state-owned businesses outperformed smaller manufacturers. The government agency reported that the PMI for large enterprises was 52.3 percent, increase 4.0 percentage points from the previous month, while the PMI of medium-sized and small enterprises was 48.6 and 47.2 percent respectively, increasing 2.2 and 2.5 percentage points from the previous month. Further, the new order index of 50.9 increased 7.0 percentage points from the previous month, indicating that the market demand of the manufacturing industry had increased.

The Caixin China General Manufacturing PMI®, which is generally weighted toward smaller private manufacturers, rose to a value of 49.2 in January from the 49.0 value reported for December.  Report authors noted that with Covid-19 measures being relaxed, output fell at the softest pace in five months while the downturn in new orders moderated. Firms reportedly indicated that demand conditions remain subdued overall with supply chains moving closer to stabilization.


The S&P Global India Manufacturing PMI® posted a value of 55.4 for January, decreasing 2.4 percentage points from the 57.8 value reported at the end of 2022. Report commentary indicated that factory orders and production rose at slower rates while international sales growth weakened to a ten-month low. The January value represented nineteen consecutive months of successive production improvement. Report authors suggested that the domestic market was the main source of new business growth while international demand role slightly in January.


The S&P Global Thailand Manufacturing PMI® pointed to broad based improvement in business conditions during January, reporting a value of 54.5, compared to 52.5 reported for December. The data reinforced improving manufacturing conditions for the thirteenth consecutive month.  Report authors further indicated that the January data signaled the second-strongest overall expansion in the seven year history of this survey.

Added Insights and Perspectives

From our lens, the January data is some cause for optimism in the notion of added contraction among global supply networks but should be taken in context.

The data would indicate that some consumer related demand has returned, but that intermediate and investment goods sectors, the indicators for longer-term sustained momentum remains subdued.

There is obviously some signs of relief and possible optimism regarding an avoidance of a severe manufacturing recession occurring in the Eurozone sector in 2023, but more evidence in subsequent monthly reporting will bear that out.

A final note is our discernment that industry supply chains may be increasing their movement toward instituting a China-Plus sourcing strategy in favor of more regionalized sourcing. We state that under the observation that the January PMI readings for India, Indonesia, Thailand and the Philippines were each at expansion levels. This will also require further observation in the coming months.


Bob Ferrari

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