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It is too early to cheer the rebound in global manufacturing PMI

Although the pace of job cutting ha slowed down in many countries, the outlook on employment remains bleak given the uncertainty on the duration of the pandemic. (PTI)Premium
Although the pace of job cutting ha slowed down in many countries, the outlook on employment remains bleak given the uncertainty on the duration of the pandemic. (PTI)

  • The JP Morgan Global Manufacturing purchasing managers index rose to a six-month high of 50.3 in July from 47.9 in June
  • Global manufacturing employment fell for the eighth month running in July, albeit at the slowest rate since March

MUMBAI: The global manufacturing sector moved back in the expansion territory in July, courtesy revival in output and new orders. The JP Morgan Global Manufacturing purchasing managers index (PMI) rose to a six-month high of 50.3 in July, up from 47.9 in June. The index is back above the neutral 50 mark for the first time since January. A reading above 50 separates expansion from contraction. Of the 27 nations for which July data were available, 13 had PMI readings above the crucial 50-mark, said the survey report.

However, this recovery should be taken with a pinch of salt simply because employment continues to be in the doldrums. Global manufacturing employment fell for the eighth month running in July, albeit at the slowest rate since March. Job losses were registered across the consumer, intermediate and investment goods sectors, the report said.

Loss of employment would keep a lid on incomes and consequently consumption demand. Although the pace of job cutting is slowing in many countries, the outlook on employment remains bleak given the uncertainty on the duration of the pandemic. Regional outbreaks and stricter restrictions pose a risk to this rebound seen in global manufacturing activities.

Commenting on the data, Olya Borichevska, global economist at JPMorgan, said: “The July PMI indicates that the recovery which began in May continued into mid-summer. Many of the PMI components reached their pre-pandemic levels for the first time in July including output and new orders. The employment PMI has not recovered suggesting labor markets will take longer to improve. Still, to fully recoup the losses sustained in the first half of the year will still take some time, especially if the recovery is knocked off course by any future re-tightening of restrictions."

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