Global Supply Chain May Be “Stuck in Mud” Too

Growth is so sluggish that surveys cannot tell the difference between token gains and flat, say economists.

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While supply chain managers may note that the ISM purchasing managers’ index (PMI) has bounced back over 50 to 50.9 in June from 49.0 in May, some economists maintain that such surveys may not mean much.

“The ISM report says that manufacturing is essentially stalled,” said Michael Montgomery, U.S. economist for IHS Global Insight. “The Markit Economics version (constructed in a very similar fashion) says that there is modest growth.”

Markit Economics is an independent, global provider of some of the world’s most influential business surveys.

“From our perspective, taking all the data, that means growth is so sluggish that surveys cannot tell the difference between token gains and flat,” added Montgomery.

The manufacturing sector turned mildly negative in May, then mildly positive in June. The two-month average is virtually neutral and the three-month average a token plus — all 12-month averages are very close to June readings.

According to IHS, that means that the manufacturing operating environment is almost identical to what it has been for most of the last year, with no signs of improvement or deterioration.

Similar conditions of near stagnation exist overseas, with Europe on the underwater side of neutral but clawing back toward neutral, China just under neutral, and only Japan showing any signs of a recovery that is gaining momentum. Worldwide manufacturing is stuck in the mud.

“The manufacturing sector is recording such modest growth that surveys cannot tell the difference from stagnation,” said Montgomery.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

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