Global Manufacturing Ends 2020 With Optimism

Global manufacturing ended 2020 with growth rates for production and new orders among the strongest of the past decade. The J.P. Morgan Global Manufacturing PMI posted 53.8, unchanged from November’s 33-month high. Output continued to expand in December, although at a slightly slower pace, and was led by growth in Germany, Brazil and India. New orders expanded for the sixth month supported by an increase in export orders. Employment growth was flat with job creation in the U.S. and Japan offset by staff cuts in China, the Eurozone and UK. Supply chains continued to struggle with pandemic disruptions resulting in supplier lead times lengthening to near-record extents. Rapidly rising input costs triggered the steepest growth in selling prices since mid-2018. The global outlook remains positive but tempered with caution due to new waves of COVID infections.

The IHS Markit Eurozone Manufacturing PMI accelerated to 55.2, gaining 1.4 points from November and remaining above the 50 neutral mark for the sixth successive month. Demand for German goods drove much of the growth in December along with an increase in export activity. Backlogs increased for a fifth month with production impacted by supplier delays and input shortages. Inventories fell as manufacturers depleted stocks of raw materials and semi-manufactured goods. Operating expenses rose to the greatest degree since November 2018, said IHS Markit, as inflation rates climbed sharply in the region. Optimism for business activity in the next 12 months was at its highest level in almost three years as manufacturers looked forward to a normalization of operating conditions by the end of 2021.