Global PMI snapshot – suggest a continued earnings deceleration

Quick take

A slim majority of the 33 countries and regions we follow for the monthly Manufacturing Purchasing Managers Index increased in April. 18 out of 31 countries saw an improvement in manufacturing growth. The JPM Global Index fell modestly from 50.5 to 50.3 while the Eurozone index improved modestly from 47.5 to 47.9, indicating a slower contraction of manufacturing activity. (an index level above 50 indicated expansion while below 50 indicated a contraction of manufacturing activity monthover-month).

Of the 10 countries that have a PMI below 50 (contraction), 5 saw an improvement in growth month-over-month. In particular, the German index may have seen a bottom with a modest gain from 44.1 to 44.4.

United States

U.S. manufacturing firms registered a moderate improvement in operating conditions in April. Expansions in output and new orders picked up from March's recent lows, with new business growth the fastest for three months. Despite a further rise in backlogs of work, the rate of job creation was the slowest since June 2017 and only moderate overall, in part reflecting skill shortages. Expectations towards the coming year were relatively subdued and down to the lowest seen so far this year. Meanwhile, inflationary pressures continued to soften for a sixth month running.


In line with recent trends, the capital and intermediate goods sectors remained the principal areas of weakness in April. Both sectors remained firmly inside contraction territory, despite registering slight improvements in their respective PMI numbers. In contrast, the consumer goods sub-category continued to expand, with growth here rising to a modest level. With the exception of the UK (which is still in expansion), the larger economies of Europe (Germany, France, Spain, Italy) saw improvement in their headline figures.


The slight uptick in the headline PMI at the start of the second quarter was due in part to a slower fall in output. However, the rate of contraction was still marked overall and the second-quickest seen in over six-and-a-half years. The main area of weakness on the production front was the investment goods sector, which showed an accelerated decline. Behind the decrease in output in April was a seventh straight monthly reduction in new orders. Despite easing slightly since March, the rate of decline remained sharp and quicker than at any other point over the past ten years. This was also the case for new export orders. Where firms reported a decrease in inflows of new work, this was often linked to a slowdown in the automotive industry.


Latest PMI data showed that the overall health of China’s manufacturing sector improved for the second month running in April, albeit at a softer pace. Output and total new work both rose slightly, though companies reported a marginal fall in new work from overseas. Buying activity meanwhile stabilized, but relatively subdued demand conditions led firms to remain reluctant to expand their inventories in April. Prices data indicated that overall inflationary pressures softened at the start of the second quarter. Input costs and output charges both rose only marginally, with some linking lower selling prices to recent sales tax reforms.


April data revealed a downturn in business conditions across the Canadian manufacturing sector for the first time in more than three years. The weaker performance mainly reflected modest reductions in output, new orders and employment during the latest survey period. Manufacturers responded to softer customer demand by cutting back their input buying and streamlining their inventories in April. On a more positive note, input cost inflation remained much softer than the peaks seen last summer, despite pressure from rising transportation costs.

Why this matters

Be it trade tensions or just part of the natural business cycle, manufacturing activity peaked in December 2017 and has been decelerating globally since. The data thus far in 2019 has been less than encouraging specifically in key countries of China and Germany. Manufacturing is key to earnings support and as such the outlook for 2019 based on the data at hand, suggests a continued deceleration of earnings growth.

Our thoughts

We want to see a reacceleration of manufacturing growth before we turn more bullish on stocks. The latest bump in the trade negotiation road between China and the US will no doubt hurt business confidence and we would expect the May PMI data to reflect this barring a very quick resolution. In the meantime, trade negotiating tactics are playing havoc with the equity markets. In another environment we might suggest volatility presents a buying opportunity. Today, without fundamental support and a marked improvement in the economic data, we would suggest holding off for a better signal before reloading into equities.

This is a table showing the the monthly Manufacturing Purchasing Managers Index for 32 countries and regions as well as the JP Morgan Global Purchasing Managers Index over the 2 year period ended April 2019. An index level above 50 indicates expansion while an index level below 50 indicates a contraction of manufacturing activity month-over-month.
This table is an extension of the dataset in the previous 2 year heat map above showing the monthly Manufacturing Purchasing Managers Index for 32 countries and regions as well as the JP Morgan Global Purchasing Managers Index over the 5 year period ended April 2019


This is a bar chart showing Global Manufacturing Purchasing Managers Index Averages for the United States, Eurozone, China (Caixin), Japan, the United Kingdom, Brazil, Canada and the JP Morgan Global Purchasing Managers Index over the 1 Year, 6 Month and 3 Month periods as at May 7, 2019. The data thus far in 2019 has been less than encouraging as many key countries and regions are showing contracting manufacturing activity. Source: Markit, Manulife Investment Management as of May 7, 2019.

A rise in interest rates typically causes bond prices to fall. The longer the average maturity of the bonds held by a fund, the more sensitive a fund is likely to be to interest-rate changes. The yield earned by a fund will vary with changes in interest rates.

Currency risk is the risk that fluctuations in exchange rates may adversely affect the value of a fund’s investments.

This material, intended for the exclusive use by the recipients who are allowable to receive this document under the applicable laws and regulations of the relevant jurisdictions, was produced by and the opinions expressed are those of Manulife Investments as of the date of this publication, and are subject to change based on market and other conditions. The information and/or analysis contained in this material have been compiled or arrived at from sources believed to be reliable but Manulife Investments does not make any representation as to their accuracy, correctness, usefulness or completeness and does not accept liability for any loss arising from the use hereof or the information and/or analysis contained herein. The information in this document including statements concerning financial market trends, are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Manulife Investments disclaims any responsibility to update such information. Neither Manulife Investments or its affiliates, nor any of their directors, officers or employees shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained herein.

All overviews and commentary are intended to be general in nature and for current interest. While helpful, these overviews are no substitute for professional tax, investment or legal advice. Clients should seek professional advice for their particular situation. Neither Manulife Financial, Manulife Investments™, nor any of their affiliates or representatives is providing tax, investment or legal advice. Past performance does not guarantee future results. This material was prepared solely for informational purposes, does not constitute an offer or an invitation by or on behalf of Manulife Investments to any person to buy or sell any security and is no indication of trading intent in any fund or account managed by Manulife Investments. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Unless otherwise specified, all data is sourced from Manulife Investments.

This commentary reflects the views of the sub-advisor(s) of Manulife Investments. These views are subject to change as market and other conditions warrant. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Manulife Funds, Manulife Corporate Classes and Manulife Leaders Portfolios are managed by Manulife Investments, a division of Manulife Investments.

Kevin Headland, CIM

Kevin Headland, CIM, 

Senior Investment Strategist

Manulife Investment Management

Read bio
Macan Nia, CFA

Macan Nia, CFA, 

Senior Investment Strategist

Manulife Investment Management

Read bio