Daily Outlook

PMIs in Europe show businesses doing worse open than closed

How can a company be doing worse open than when it is closed? That’s the puzzle presented on Monday by the latest round of purchasing managers index readings across the globe, showing still depressed conditions.

The IHS Markit eurozone manufacturing purchasing managers index rose to 39.4 in May from 33.4 in April, well below the 50 mark indicating deteriorating conditions. IHS Markit said investment-goods producers had a particularly rough month. In Germany, manufacturing PMI was a horrid 36.6, and the readings topped out at 45.4 in Italy. The U.K. Markit/CIPS manufacturing PMI rose to 40.7 in May from 32.6 in April.

“The improvement [in the eurozone PMI] in part merely reflects the comparison against a shockingly steep fall in April, but more encouragingly was also linked to companies restarting work as virus lockdowns were eased. The further lifting of COVID-19 restrictions in coming months should provide a further boost to manufacturers,” said Chris Williamson, chief business economist at IHS Markit.

On Twitter, Williamson tried to explain how businesses reported worse conditions when open.
Chris Williamson
Almost one-in-four reported higher output during the month, but firms are generally not seeing order books improve so many that did stay open are reporting weaker production trends.

In China, both the official and the Caixin manufacturing purchasing managers index were above the 50 mark.

The Institute for Supply Management’s U.S. manufacturing index edged up 1.6 points to 43.1% in May.

PMIs in Europe show businesses doing worse open than closed — if taken literally, MarketWatch, Jun 1

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