Markit/BME Purchasing Managers’ Index, May 2009
The seasonally adjusted Markit/BME Purchasing Managers’ Index® (PMI®) – designed to give a single-figure snapshot of operating conditions in the manufacturing economy – rose from 35.4 to 39.6 in May, its largest ever one-month gain. This mainly reflected slower falls in output, new orders and employment than in April. Although the PMI hit a seven-month high, the index was at a historically low level and remained well below the neutral 50.0 mark. Deteriorating overall operating conditions have now been recorded for ten months running, the longest continuous period since 2002/3.
May data signalled a sharp easing of the rate of decline in manufacturing output. Reduced rates of contraction have been recorded in each month since January’s survey record fall. Anecdotal evidence suggested that a more moderate drop in new orders supported production levels in May.
The seasonally adjusted index measuring new order volumes recorded one of its largest ever one-month gains in May, to signal that new work contracted at a much slower rate than in April. This mainly reflected weaker falls in new orders at intermediate and investment goods producers. Manufacturers commented that price discounting and improved sentiment about the economic outlook had supported client demand in the latest survey period.
New export orders also declined at a slower pace, with the rate of reduction the least marked since September 2008. Companies noted that demand from the rest of Europe and the US remained fragile, but new export business from Asia (particularly China) showed some signs of stabilisation.
A steep rate of job shedding persisted in May as firms continued to implement staff restructuring in response to excess capacity at their plants. Reports from panellists also pointed to a general aversion to hiring in May, leading to delays in the replacement of departing staff. Employment levels have now fallen for eight months running, but the rate of decline eased slightly since April’s survey record.
Substantial destocking continued in May as firms adjusted to lower demand and sought to cut costs through improved stock management. Both stocks of purchases and finished goods inventories declined at their fastest rates since the survey began in April 1996.
Average cost burdens dropped sharply in the latest survey period, albeit at the least marked rate since last November. Lower prices for raw materials were commonly cited, particularly metal alloys. A combination of sharply falling costs and intense pressure for discounts from clients led to another marked drop in factory gate prices. The rate of decline in charges hit a new survey record in May.
