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Global Factory Activity: Manufacturing Momentum in Vietnam Slows, US Starts to See Gains

Manufacturing took a more positive turn for most nations in July, though conditions in Vietnam have moderated.

While Vietnam was expected to be enjoying the spoils of a Trans-Pacific Partnership, manufacturing in the country has eased in the wake of the trade agreement’s apparent death. In the U.S., conditions are starting to look up, reaching a high not seen since March.

The J.P. Morgan Global Manufacturing Purchasing Managers’ Index (PMI) for July was 52.7 (a PMI of 50 separates growth from contraction), essentially flat to June’s 52.6, and the firm said growth was led by European nations, with Asia struggling in comparison.

Here’s a look at July’s PMI across key sourcing countries.

United States

Manufacturing in the United States looks to be making gains after weakening for several months.

In July, the PMI reached a four-month high of 53.3, up from 52.0 in June.

Expansions in output and new orders drove growth in the month and manufacturers increased their purchasing activity at the quickest pace since February. According to those surveyed, production picked up in response to higher client demand as companies expand and grow more willing to spend. With that expansion in production, though, came higher inventories and longer average delivery times. Manufacturing jobs grew at the strongest pace in five months.

“Although rising, the survey indices remain consistent with only very modest increases in comparable official data such as manufacturing output, durable goods orders and payroll numbers,” IHS Markit chief business economist Chris Williamson said. “Clearly the manufacturing sector remains stuck in a low gear, though it is at least gaining momentum and will hopefully shift up a gear as we move through the second half of the year if demand continues to improve.”


Operating conditions for China’s manufacturers continued to improve in July.

The PMI came in at 51.1 in the month, up from 50.4 in June.

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Output and new orders rose at the fastest rates in five months thanks to an increase in new export sales, and though moderate, it was the best pace of improvement in four months. To meet greater demand from foreign markets, manufacturers in China raised their output, though they were still cautious when it came to increasing employment. Also in July, input prices rose faster than in June and companies charged higher prices for their output.

“Operating conditions in the manufacturing sector improved further in July, suggesting the economy’s growth momentum will be sustained,” Dr. Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said. “That said, its unlikely that financial regulatory tightening will be relaxed.

[Learn more about economic forecasts by country: IMF Global Outlook Strong, but Pockets of Weakness Remain]


Production in Canada rose in July to its fastest pace since March, thanks to a “robust” improvement in new orders.

The PMI for July was 55.5, up from June’s 54.7, marking the 17th straight month above the 50-marking separating expansion from contraction.

While new orders increased, input cost inflation reached a nine-month low thanks to a stronger exchange rate against the U.S. dollar. Demand for raw materials strengthened and purchasing activity picked up to the fastest pace since December 2014, however, that higher demand continued to pressure supply chains and average cost burdens increased sharply. Softer input prices served to balance things out though, and manufacturers didn’t raise prices.

“The manufacturing sector moved back on the right track in July, with business conditions improving at the fastest pace for three months,” SCMA president and CEO Christian Buhagiar said in the IHS Markit press release. He added, however, “Supply chain pressures and low stocks among vendors remained a concern to manufacturers in July. Survey respondents have reported a sharp lengthening of deliver times for raw materials in recent months, suggesting the greatest squeeze on capacity for around three years.”


Manufacturing growth in Mexico eased last month as the increase in production and new orders slowed.

For July, the PMI was 51.2, down from 52.3 in June.

Manufacturing was up overall in Mexico, but improvement slowed because of weaker rises in output and new work, and the country saw a decline in export sales for the first time in more than a year. Despite that, manufacturers still reported higher job creation and indicated long-term expansion plans.

“July’s survey data suggests that the Mexican manufacturing sector is struggling to break out from its recent slow growth trajectory,” IHS Markit associate director Tim Moore said. “With cost pressures losing intensity, manufacturers revealed a slowdown in factory gate price inflation to its weakest in almost one year.”


Exports faltered in Japan last month, leading manufacturing sector growth to expand at a slower pace.

The PMI for July was 52.1, down slightly from June’s 52.4.

Gains in output and new orders helped offset the weakest export trade in nearly one year, and prices rose following rising input costs. Despite all of that, Japanese manufacturers are optimistic about positive demand projections and planned new product launches ahead of the 2020 Tokyo Olympics.

“Sectoral growth was further impacted by ongoing marked deteriorations in delivery times, which deteriorated to the greatest extent for over five-and-a-half years,” IHS Markit senior economist Paul Smith said. “However, sentiment reached its highest level in over five years of data collection and, combined with ongoing rises in staffing levels, provides some reassurance that growth should be sustained in the coming months.”


Conditions in Vietnam’s manufacturing sector have moderated.

In July, the PMI was 51.7, down from June’s 52.5.

Both output and new orders slowed in the month, though the rate of new order growth was enough for firms to see a pickup in backlogs of work, which led to a reduction in stocks as inventory was used to fill new orders. Cost inflation eased to the lowest in more than a year, and output prices came down.

“It’s not all doom and gloom, however,” IHS Markit’s Andrew Harker said. “…the fact that backlogs of work rose at the fastest pace in over six years, and inventories of finished products fell, suggests firms will be looking to increase their output in coming months.”


After reaching a three-month low in June, manufacturing in the U.K. picked up thanks to solid growth in new export orders.

The PMI for July 55.1, which follows June’s 54.2.

Stronger inflows of new work, more production and greater job creation helped boost the PMI, though the rate of increase was still the slowest in the past year, despite the boost in new exports that came as a result of higher foreign demand. Companies reported improved inflows of new work from North America, Europe, Asia-Pacific and the Middle East.

“Price pressures also continued to ease in July, as the rates of input costs and output charge inflation both slowed further. Input prices rose at the weakest pace in over a year, down substantially from the record high seen at the start of the year,” IHS Markit director Rob Dobson said. “If this trend of milder price pressures is also reflected in other areas of the U.K. economy, this should provide the Bank of England sufficient lee-way to maintain its current supportive stance until the medium-term outlook for economic growth becomes less uncertain.”


Manufacturing conditions in Europe slowed a touch in July.

The PMI came in at 56.6 in the month, down from June’s 74-month high of 57.4.

Austria, the Netherlands and Germany saw the strongest improvements in operating conditions. Growth in France accelerated to its fastest in more than six years and Greece held steady in expansion territory, posting a 50.5 PMI. Manufacturers across the region saw solid gains in new business from domestic and foreign buyers, though rates of output, new order and new export business all eased.

“Eurozone factories were buzzing with activity again in July. The PMI came in slightly below the earlier flash estimate, slipping to a four-month low, but this is still an encouragingly buoyant reading,” IHS Markit’s Williamson said. “The survey indicates that manufacturing output was growing at an annual rate of approximately 4 percent at the start of the third quarter, sustaining the best growth spell that the region has seen for six years.”