No real growth in global manufacturing suggests no change in demand for recycled materials

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Manufacturing worldwide was subdued in July, with little change on the month before.  

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For recyclers, it suggests that demand is set to remain constant if the picture remains the same in coming months. 

Globally, the manufacturing sector continues to feel the impact of shortages of certain raw materials as well as suppliers new pricing power and increased tariffs.  

UK: 

The UK’s manufacturing industry remained subdued compared to earlier in the year. At 54.0, the IHS Markit/CIPS Purchasing Managers’ Index (PMI) was 0.4 below June’s level, but remained above its long-term average of 51.8.  

This is due to slower expansion rates in output and new orders.  

Price pressures remained elevated as an increase in average input costs led to the steepest rise in selling prices since February. 

Manufacturers saw the weakest rate in expansion output in 16 months, but there was an increase of new orders from mainland Europe, United States, China and the Middle-East.  

Investment goods producers had the strongest growth of both production and new orders during July. 

UK manufacturers reported that cost inflation remained high in July, as rising commodity prices  and shortages of raw materials pushed up costs. Part of the increase was passed onto customers, leading to the steppest increase in selling prices since February. 

US: 

In the United States, manufacturing growth remained strong, despite easing last month.  

The PMI dipped to a five-month low of 55.3 compared to 55.4 in June. This was due to weaker rises in output and employment.  

Production rose across all US manufacturing sectors in July as greater client demand and larger new order volumes occurred due to increased output. Although the rate of expansion was relatively strong, it was the slowest since November 2017.  

New order growth continued to surpass that of output, as the upturn in new business matched that of June. Subjective evidence found that the rise was due to new clients and demand conditions, but growth was largely driven by the domestic market.  

Pressure on supply chains heightened as delivery times lengthened to the largest extent since the Markit PMI series began.  

Increased demand for inputs was worsened by firms apparently stockpiling raw materials and the rate of input price inflation accelerating to the third fastest since March 2012. They were doing this as a result of fears that tariffs imposed on imports by the US Government would lead to higher cost. 

However, producers trying to buy raw materials were met with suppliers having greater pricing power as a result of demand ahead of implementation of the tariffs.   

Eurozone: 

For the Eurozone, manufacturing remained subdued at the start of July’s third-quarter.  

The PMI was 55.1, unchanged from its estimate, and a small recovery from June’s 18-month low of 54.9.  

Germany and Austria improved their growth slightly, but the Netherlands eased into a 14-month low, while France accelerated.  

Despite a mild improvement, the rate of expansion was the second weakest since November 2016 as there was a slowdown in the pace of increase in new orders and worry about tariffs and trade wars. 

Price pressures were prominent as input costs and output charges both rose at above the survey-average rate, although purchase price inflation was weaker than June. 

This increase of input costs was down to supply-chain delay, tariffs and raw material shortages.  

China: 

China’s official PMI decreased from the June figure of 51.5 to 51.2 in July suggesting that already weak performance by Chinese manufacturers was worsening. 

China’s raw material inventory index increased slightly to 48.9 in July from 48.8 in June. This was after improving for five months in a row up to June (albeit continuously showing decline rather than growth). This shows that Chinese manufacturers are not confident about holding stocks of raw materials as they fear they will be left with them if demand for finished goods does not improve. 

Worryingly, new orders for Chinese manufacturers is also slowing to 52.3 in July down 0.9 on June.  

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