UK and US manufacturing operations improve, while Eurozone growth slumps

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UK: 

The UK’s manufacturing sector mildly improved in its performance throughout September. At 53.8, the IHS Markit/CIPS Purchasing Manager’s Index (PMI)has remained above the neutral 50.0 for 26 months and is an improvement on August (53.0).  

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This is due to rates of expansion in output and new orders gaining traction and the new export business seeing a modest recovery.  

Price pressures remained elevated as input costs and output charge inflation both strengthened, with manufacturing production rates rising to a four-month high as there was a big increase of new orders throughout September.  

Foreign demand posted a mild recovery following solid contraction in August, with businesses linking this growth to higher sales to the United States, Europe, Canada, Scandinavia and Russia.  

Purchasing costs rose at the fastest rate since June as prices rose for paper, plastics, metals and other products.  

Shortages of certain raw materials contributed to a lengthening average vendor lead times, with supplier delivery times increasing for the 29th successive month.  

 

US: 

In the United States, operations improved across the manufacturing sector as there were sharper rises in output and new orders.  

This was shown in the PMI as it increased to 55.6, up from 54.7 in August, and is a four-month high and above the series trend. Although the average for the third quarter was strong overall, it signalled the softest growth since the fourth quarter in 2017. 

Production rose across the producer goods sector at a sharp rate in September and was the fastest since May, as well as adding to the rise in new business and demand conditions. 

New orders increased with the rate of expansion reaching a four-month high, with backlogs accumulating at the joint-fastest rate since September 2015. 

This was driven by stronger client demand and increased marketing activity in order book volumes. However, new export orders only rose slightly as businesses noted a concern around the effect of tariffs on foreign demand. 

Growth of purchasing activity was driven by the faster expansion of new orders. Input buying increased at the quickest rate since April.  

Cost burdens continued to rise markedly, with the rate of input price inflation matching that of August due to an increase on tariffs and greater demand for inputs. Although, the rate of inflation dipped to a nine-month low due to some companies being reluctant to raise factory gate prices. 

 

Eurozone: 

For the Eurozone, growth was the weakest since September 2016, and is in line with the decreasing trend seen since the beginning of the year. 

The PMI fell to 53.2 down sharply from August’s 54.6. 

The Netherlands was the only country in the Eurozone that increased its PMI, reaching a 3-month high of 59.8.  

Germany hit a 25-month low at 53.7, although it still remained the best performing of the four largest Eurozone economies. Similar trends were seen in Spain (51.4) and Italy (50.0), although Germany 

France saw a solid expansion, but September remained the weakest in 3 months. 

The slowdown of the manufacturing sector was linked to a weakening trading cycle.  

 

China: 

China’s PMI slightly decreased in September to 50.8, down on the August figure of 51.3. 

Of concern to recyclers will be that the raw material index was down to 47.8 in September from 48.7 in August. After appearing to improve in recent months, although never exceeding the growth level of 50.0, this sub-index has taken a sudden downward fall. This suggests that Chinese demand for materials is weakening, along with less demand for manufactured goods from China.

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