Yesterday's manufacturing PMI continued the run of disappointing industrial data for the first quarter. The average indicator for the first three months comes in at 48.9 - below the 50, no change mark, and a touch weaker than the average across 2012q4. The survey for March pointed to sluggish export demand (pretty much in line with EEF's Q1 Business Trends Survey) remaining a source of weakness, indicating that rebalancing growth towards more trade and investment remains an uphill challenge.
There was a similar theme across other PMIs.
Manufacturing PMI 50= no change
Source: Markit Economics and ISM
With the exception of a decent February in Germany, manufacturing activity across the eurozone has remained fairly depressed since the start of the year. In March, surveys showed that output declined across all participating countries and inflows of new business remained weak. In France and Italy, the manufacturing PMI has been showing contraction for 13 and 20 consecutive months respectively. The continued run of downbeat data from the region, still the UK's biggest market, is part of the reason why activity indicators have disappointed at home.
The US has, however, been a source of better news. Manufacturing activity has been in positive territory since last September, although the headline number softened a little in March, this was mainly due to an easing in growth in domestic orders.
And in China the news was better but not brilliant. The manufacturing PMI recovered - with production, orders and exports all up on the month - following the New-Year related dip in February. However the pick-up was somewhat weaker than expected, leading to a verdict of steady growth rather than acceleration.
Global manufacturing activity has therefore remained pretty subdued on the first quarter of the year and the UK is facing many of the same demand and competition challenges as much of the rest of the world. EEF's last manufacturing survey pointed to expectations that the demand outlook would begin to improve in the second quarter of this year, with strong positive balances of companies planning for increased output and export orders (see chart).
Global events in recent weeks have placed a few more bumps on the road for global manufacturing. Firstly crisis hit Cypriot banks and the will they/won't they bail out saga marked another confidence sapping event in the eurozone, even if any direct impact on the wider eurozone economy would be relatively minor. Secondly, the US will see spending cuts kicking in through this year which will take some of the gloss off the more positive data readings on employment and the housing market over the past few quarters.
We still expect the UK manufacturing outlook to pick up though 2013, but risks to the outlook have returned.
EEF Business Trends Survey - % balance of change