The strong manufacturing momentum since the second half of 2016 is slowing in the US and China, while Europe is showing continued strength.
The US ISM manufacturing purchasing managers’ index (PMI) fell in April to 54.8 from 57.2 in March, showing continued expansion but at a slower pace. Combined with the weak 0.7% US GDP growth in Q1 and plunging April auto sales, it paints a weakening economic picture.
The US Federal Reserve on 3 May acknowledged the slowdown but said it is “likely to be transitory”. Most economists see a major rebound in US GDP in quarter 2.
China’s Caixin manufacturing PMI fell to 50.3 in April versus 51.2 in March, barley above the 50 level delineating expansion or contraction. Tightening credit in China is starting to have an impact and could become more pronounced through the rest of the year.
In contrast, Europe has been the strongest link on the manufacturing side, with the Markit Eurozone Manufacturing PMI expanding to 56.7 in April from 56.2 in March – at its highest level in six years.