Skip to main content

Global Production Outlook Bleak, But Steadying

Manufacturing conditions improved slightly in September and through the third quarter, as inflationary pressures eased. However, high energy prices and weakened consumer demand painted a cloudy outlook, according to S&P’s Global Purchasing Manufacturing Index (PMI) of key economies.

United States

U.S. private sector firms registered a softer fall in output during September, according to the latest PMI data from S&P Global.

At 51.8 in September, up slightly from 51.5 in August, the S&P Global Flash U.S. Manufacturing PMI continued to signal a relatively subdued improvement in the health of the manufacturing sector. The September headline reading was the second-lowest since July 2020.

Weighing on the overall upturn was a further contraction in production in the period. Relatively muted demand and supply chain constraints continued to hamper output and capacity, with backlogs of work increasing again.

New orders grew for the first time in four months at the end of the third quarter. Subdued demand conditions reportedly stemmed from concerns regarding inflation and economic uncertainty. New export orders remained in contraction territory amid challenging economic conditions in key export markets.

Related Stories

Although input costs increased at a softer pace during September, firms raised their output charges at a sharper rate. Average operating expenses rose at the slowest pace since November 2020, as some material prices reportedly fell. Historically elevated increases in costs were, however, partially passed on to customers.

“U.S. businesses are reporting a third consecutive monthly fall in output during September, rounding off the weakest quarter for the economy since the global financial crisis if the pandemic lockdowns of early-2020 are excluded,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said. “There was also better news on inflation, with supplier shortages easing to the lowest since October 2020, helping take some of the pressure off raw material prices.”

“These improved supply chains, accompanied by the marked softening of demand since earlier in the year, helped cool overall the rate of inflation of both firms’ costs and average selling prices for goods and services to the lowest since early-2021,” Williamson added. “Inflation pressures nevertheless remain elevated by historical standards and, with business activity in decline, the surveys continue to paint a broad picture of an economy struggling in a stagflationary environment.”


The euro area’s manufacturing sector fell deeper into contraction territory during September, the latest PMI data from S&P Global showed, citing further slides in output and new orders.

The S&P Global Eurozone Manufacturing PMI fell to 48.4 in September from 49.6 in August, signaling a worsening of operating conditions for euro area goods producers. The headline index slumped to its lowest level since June 2020.

In some cases, production volumes were reduced in response to high energy prices, while many firms adjusted their operating schedules downward in line with lower order books. Demand for Eurozone goods sank sharply in September, S&P said, as high inflation and economic uncertainty reportedly squeezed client appetite. Overall inflationary pressures accelerated in September, led by rising costs for energy.

Ireland was the only monitored euro area country to record a manufacturing PMI in expansion territory during September. France and Germany–the two largest Eurozone economies–both recorded the worst deteriorations in manufacturing sector conditions at the end of the third quarter, with their respective PMIs at the lowest levels since the first wave of the Covid-19 pandemic in the first half of 2020.

“The ugly combination of a manufacturing sector in recession and rising inflationary pressures will add further to concerns about the outlook for the eurozone economy,” Williamson said. “Excluding the initial pandemic lockdowns, Eurozone manufacturers have not seen a collapse of demand and production on this scale since the height of the global financial crisis in early-2009. The downturn is being driven primarily by the surging cost of living, which is reducing spending power and hitting demand, but soaring energy prices are also increasingly limiting production at energy intensive manufacturers.”

“The combination of rising costs and slumping demand has also pushed firms’ expectations for the year ahead sharply lower again in September, leading in turn to reduced input buying and lower jobs growth as firms prepare for a tough winter,” Williamson added. “The energy crisis has offset the easing of inflationary pressures from fewer supply delays in recent months. Input cost inflation re-accelerated after four months of cooling price pressures, putting further upward pressure on consumer price inflation.”


Business conditions across China’s manufacturing sector deteriorated modestly in September, as efforts to contain the Covid-19 virus weighed on performance.

Total new business dropped for the second month in a row, which led to a renewed fall in output, while firms also trimmed their purchasing activity and inventories. Reduced demand for inputs placed further downward pressure on prices, with input costs falling at the quickest rate since the start of 2016.

The headline seasonally adjusted PMI–a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy–declined to 48.1 in September from 49.5 in August, posting a back-to-back deterioration in the overall health of the sector.

The reading was consistent with only a mild rate of contraction, however. A key factor driving the index lower was a faster fall in new orders during September. New business fell for the second month in a row and at the quickest rate since April, with panel members often commenting that restrictions around travel and operations had dampened customer demand.

Disruptions to operations due to Covid-19 restrictions, including temporary closures, alongside softer customer demand, led to the first fall in output for four months. Companies often looked to pass on any cost savings to clients to help improve sales, which led to the quickest fall in selling prices since December 2015.

Subdued demand conditions and lower production requirements led firms to cut back on their purchasing activity in September, with the rate of decline the quickest in four months.

“The gauges for production and total new orders were both lower than 50, and recorded new lows in the past four and five months, respectively,” Dr. Wang Zhe, senior economist at Caixin Insight Group, said. “External demand also contracted sharply, with the reading for new export orders the lowest since May. Price indices continued to fall. With declines in the prices of bulk commodities, especially steel, input costs for producers of intermediate and investment goods fell sharply, and the gauge for input prices sank to the lowest reading since January 2016.”

“Due to the impact of the market slump, firms, especially investment goods manufacturers, were eager to promote sales by cutting prices,” Zhe added. “In September, the gauge for output prices remained below 50 for the fifth consecutive month and recorded the lowest reading since December 2015. Both purchases and inventories fell. Due to limited market demand, manufacturers reduced the volume of purchases and at the same time cut inventories…The measure for future output expectations, although still in expansionary territory, declined more than three points and marked the lowest reading since November 2019. The concerns of surveyed entrepreneurs still stemmed from reoccurring Covid outbreaks and the impact of related controls on the market.”


The Vietnamese manufacturing sector remained solidly inside growth territory at the end of the third quarter of the year, S&P said.

The S&P Global Vietnam Manufacturing PMI registered 52.5 in September, just below the reading of 52.7 in August, but still pointing to a solid improvement in business conditions across the sector. Operating conditions have now strengthened in each of the past 12 months.

New orders continued to rise, fueling growth of output, employment and purchasing activity. At the same time, stockbuilding was evident across both inputs and finished goods. Rates of inflation remained muted in September, while firms were also helped by stability in suppliers’ delivery times.

“The Vietnamese manufacturing sector continued to tick along nicely at the end of the third quarter, with the PMI now having signaled overall expansion throughout the past year,” Andrew Harker, economics director at S&P Global Market Intelligence, said. “A much more benign price and supply environment is providing support, while demand also improved again in September.

“There were some tentative signs of new order growth slowing, however, particularly with regards to exports,” Harker added. “This was a factor in a renewed expansion in stocks of finished goods, as some firms sold fewer items than expected. This may lead manufacturers to limit production growth in October, but business confidence remained strong and so the prospects for the final three months of the year appear positive overall.”


September PMI data from S&P Global indicated a strong improvement in the health of the Indian manufacturing industry, as companies stepped up production in tandem with a sustained increase in new work intakes.

Posting 55.1 in September, the seasonally adjusted S&P Global India Manufacturing PMI was in expansion territory for the 15th month in a row. The headline figure slipped from 56.2 in August, though pointed to a solid rate of growth.

To accommodate higher sales and greater output needs, firms hired extra workers and acquired more inputs. The upturn in input buying was aided by cooling price pressures. Purchasing costs rose at the slowest pace in just under two years, S&P noted, while output charge inflation receded to a seven-month low.

Factory orders continued to increase at the end of the second quarter, stretching the current sequence of expansion to 15 months. Despite easing to the weakest since June, the rate of growth was sharp. Anecdotal evidence pointed to greater demand from domestic and international clients.

“The latest set of PMI data show us that the Indian manufacturing industry remains in good shape, despite considerable global headwinds and recession fears elsewhere,” Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said. “There were softer, but substantial, increases in new orders and production in September, with some leading indicators suggesting that output looks set to expand further at least in the short-term as firms seek to fulfil sales contracts and replenish stocks.”

“Businesses also benefited from a notable moderation in price pressures,” De Lima added. “Input costs rose at the slowest rate in almost two years, as suppliers’ stocks improved in line with subdued global demand for raw materials and recession risks. Subsequently, Indian companies sought to restrict selling price hikes and overall charge inflation eased to a seven-month low…That said, currency risks and the impact of a weaker rupee on inflation and interest rates could derail optimism during October.”


The latest PMI survey data from Istanbul Chamber of Industry and S&P Global indicated a further slowdown in the Turkish manufacturing sector, with output, new orders and purchasing activity all moderating.

The headline PMI posted below the 50 no-change mark for the seventh month in a row. At 46.9 in September, the latest reading was down from 47.4 in August, pointing to a more marked slowdown at the end of the third quarter. A figure greater than 50 is indicative of overall improvement of the sector.

Anecdotal evidence suggested that fragile demand conditions and inflationary pressures were the main factors leading to slowdowns of output and new orders during September. New export orders also softened, with Europe cited as a particular source of demand weakness.

“The September PMI data provided few reasons for cheer for Turkish manufacturers, as demand conditions both at home and abroad, notably in Europe, remained challenging,” Andrew Harker, economics director at S&P Global Market Intelligence, said. “The sustained slowdown in new work has had an impact on employment, with firms scaling back workforces for the first time since the initial wave of the pandemic. With manufacturers sitting on increasingly large finished goods inventories, the prospects for production over the coming months appear bleak.”