Global index of activity in the manufacturing sector, calculated by JP Morgan, shows the worst performance in 6.5 years as the gauge has been in the downward trend since early 2018, diving into contraction zone for the last two months:
The episode of slump to 50 points by the second half of 2016 was obviously associated with an oil shock, but in 2018 a wave of protectionism initiated by the United States was also added as a powerful downside factor.
The index is probably calculated as some average between local PMIs weighted by the contribution of local production to the global one. On the basis of the relevant sub-index data, a global estimate of employment in the manufacturing sector is noteworthy, which, in the absence of inflation, reflects the channel for the distribution of shocks in world trade to consumer spending and confidence. The employment index shows negative increments for several months in a row:
The “leading” indicator of new orders also dropped from 49.5 to 49.0 points, ensuring that producers will struggle to maintain production volumes in the near term.
Among the 30 countries for which PMI estimates were available, 18 countries reported a negative change in PMI in June. Japan, Germany, Britain, China, Taiwan, South Korea and Russia found themselves in the “contraction group”. The United States, Brazil, India and Australia have registered moderate gains in June but their share of employment in the production sector is smaller than in the countries that posted declines what adds significance to the weak employment index.