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Global Factory Activity: Manufacturing Stabilizes Amid Trade Uncertainty

Conditions in factories around the world seem to be stabilizing in the face of economic uncertainty, though some nations fared well while others saw tougher times amid weak demand, according to the IHS Markit Purchasing Managers’ Index (PMI), an economic indicator for business conditions in a country.

Costs continued to climb in China and production volumes stagnated in Mexico, which faced weak new order growth.

Here’s a look at February PMI’s for key apparel sourcing countries.


Conditions were generally positive for manufacturers in China in February, with output and new orders both rising at faster rates than they saw at the start of the year, according to the latest Caixin Purchasing Managers’ Index (PMI). New export business is the highest it’s been since September 2014.

The PMI was 51.7 in February, up from 51 in January.

Increased new orders led to an increase in purchasing activity, but strong demand for inputs led to a further lengthening of delivery times. Average input costs rose sharply even though the rate of inflation fell to a four-month low. Higher raw material costs put pressure on margins and manufacturers upped their output charges again in the month.

“Input and output prices continued to rise rapidly, but at slower rates compared with the previous month,” Dr. Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group said. “The Chinese manufacturing economy continued to recover in February. But it is premature to jump to the conclusion that the recovery is entrenched. The second quarter is likely a key period to look at for future trends.”


February wasn’t Mexico’s best as manufacturing conditions remained challenging and new business rose at the second slowest place since September 2013. Manufacturers surveyed said heightened uncertainly about the economic outlook put a freeze on production. Lower demand also weighed on production volumes and input purchasing, which led to the quickest reduction in stocks in more than three years.

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The PMI for the month was 50.6, down from 50.8 in January, though still above the 50 threshold separating contraction from growth.

Exchange rate depreciation contributed to  pressures from increases in average costs, and as such, margins remained under pressure and factory prices went up.

“Despite another challenging month, Mexican manufacturers indicated that business confidence recovered from January’s five-year low,” IHS Markit senior economist Tim Moore said. “The rise in optimism was linked to longer-term expansion plans and export strategies aimed at securing clients in new markets.”


Vietnam has carried on its merry way despite President Trump pulling the U.S. out of the Trans-Pacific Partnership (TPP). Output growth in the manufacturing sector hit a 21-month high in February.

Output and new orders grew at faster rates in the month and companies built up their stocks of purchases at a record pace. Input price inflation eased a bit, though sharp increases in cost burdens forced firms to raise their output prices at a faster rate.

The PMI for February hit 54.2, up quite a bit from January’s 51.9.

Total new orders rose “at a sharp and accelerated pace” in the month, according to IHS Markit, and companies reported improving demand from international clients. Supplier lead times lengthened for the first time in six months, however, as manufacturers cited a lack of workers.

“Confidence in the year-ahead outlook led to a record accumulation of stocks of purchases, while sharp rises in new orders and purchasing activity imparted capacity pressures on manufacturers and their suppliers alike,” IHS Markit’s Andrew Harker said, “This should hopefully result in more hiring in coming months as firms adjust their operating capacity in line with higher workloads.”

United States

The U.S. manufacturing sector, according to IHS Markit, is expanding at a “robust” pace, though the growth was slightly weaker than at the start of 2017 as new orders have moderated. Manufacturers surveyed said inventory levels are rising and client demand is expected to improve even further.

The PMI was 54.2 in February, down from January’s 22-month high of 55. The average reading for the first quarter of the year is slated to register as the strongest quarterly improvement to business conditions in two years.

Manufacturers surveyed cited improving domestic economic conditions as one of the reasons for the growth in new business, which resulted in hiring more staff and increasing purchasing activity. Stronger demand for inputs, however, put pressure on suppliers’ stocks and lengthened raw material delivery times. Rising raw materials prices also led manufacturers to increase their prices.

“The February survey points to a modest cooling in the rate of expansion of the manufacturing sector, but it remains too early to tell if this is the start of a more prolonged slowdown,” IHS Markit chief business economist Chris Williamson said. He added, however, that manufacturing is far from booming because the strong dollar will mean stagnant exports will continue to act as a drag on growth.


Factory activity in Europe reached a 70-month high in February, thanks to growth in Germany, the Netherlands and Italy.

The PMI for February was 55.4, up from 55.2 in January—its highest level since April 2011.

Both production and new orders rose at faster paces and manufacturers said domestic demand was solid and the weak euro led to the fastest growth in new export business in nearly six years. On the less favorable side of the euro depreciation, the weak currency drove purchase prices up and output charges to more than five-year highs.

“Euro area manufacturers are reporting the strongest production and order book growth for almost six years, in what’s looking like an increasingly robust upturn,” Williamson said. “Given the current buoyant demand environment, manufacturers are eschewing political uncertainty and quietly getting on with growing their businesses.”


Manufacturing activity was positive for India in February too, thanks to a rebound in export demand, which led to greater growth in new orders.

The PMI for February was 50.7, up from 50.4 in January.

Though things are slightly improved from January, growth rates are lower than long-run averages. Growth in both production and orders were up slightly and the increased new order intakes led to a rise in outstanding business. Input price inflation also quickened in the month, as did output price inflation as manufacturers looked to recover margins.

“With growth rates well below-par, the sector still has many areas to develop before it can fire on all cylinders,” IHS Markit economist Pollyanna De Lima said. “Businesses don’t yet seem convinced as to the sustainability of the rebound as highlighted by cuts to payroll numbers and destocking initiatives.”


Myanmar continues to face labor rights issues, but business conditions are improving regardless.

Output and new orders rose at their fastest rates in more than a year in February, though spare capacity was evident with the considerable reduction in backlogs of work. Volatile exchange rates, however, made for much higher costs.

The PMI reached 51.9 in February, up just a touch from January’s 51.7.

Manufacturers in Myanmar raised production the most it’s increased in 14 months, and took on extra staff to support it. Purchasing activity was also up in the month and input buying rose at the fastest rate in nine months. Though exchange rate instability drove input cost inflation, factories didn’t reflect the increases in their prices as stiff competition has likely stifled their pricing power, according to IHS Markit.

While certain things were more positive than they have been for Myanmar, IHS Markit senior economist Paul Smith said there’s still much room for improvement.

“Firms continue to see their margins suppressed. Input costs rose sharply amid exchange rate instability, whereas selling prices nearly stagnated thanks to competitive pressures,” Smith said. “Together, these concerns appear to have offset optimism linked to the current upturn. Business sentiment is running at its weakest in the series history.”