Top 6 crude steel producing nations - China, Japan, India, US, Russia & South Korea, accounting for almost 76% share of estimated global crude steel production of 1.6 billion tonnes in 2016, have, all but South Korea & India, posted 50 PLUS PMI reading for December indicating overall improvement in manufacturing conditions although down MoM in China, Japan, US & Russia.
PMI reading above 50 indicates an overall improvement in manufacturing conditions and below 50 an overall decrease.
Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said “The Caixin China General Manufacturing PMI was 51.9 in December, up one point from the previous month and the strongest expansion since January 2013. The sub-indices for output and new orders both hit multi-year highs while those for input costs and output charges continued to rise rapidly, underlining sustained inflationary pressure. The Chinese manufacturing economy continued to improve in December, with the majority of sub-indices looking optimistic. However, it is still to be seen if the stabilization of the economy is consolidated due to uncertainties in whether restocking and consumer price rises can be sustainable.”
Commenting on the Japanese Manufacturing PMI survey data, Amy Brownbill, economist at IHS Markit, which compiles the survey, said “The Japanese manufacturing sector ended 2016 on a good footing, with both production and new orders expanding at the sharpest rates seen over the year. The stronger PMI data are in line with the IHS forecasts for IP growth in November and December, with the annual rate of expansion set to hit 3.8% by the end of the year. Manufacturers were also more optimistic towards taking on additional workers, with job creation ticking up to a 32-month high. However, input prices increased at the sharpest rate since July 2015, with panellists mentioning the recent weakness of the yen driving up imported raw material costs.”
Commenting on the Indian Manufacturing PMI survey data, Pollyanna De Lima, Economist at IHS Markit and author of the report, said “Having held its ground in November following the unexpected withdrawal of 500 and 1,000 bank notes from circulation, India’s manufacturing industry slid into contraction at the end of 2016. Shortages of money in the economy steered output and new orders in the wrong direction, thereby interrupting a continuous sequence of growth that had been seen throughout 2016. Cash flow issues among firms also led to reductions in purchasing activity and employment. As the survey showed only a mild decline in manufacturing production in the last month of the year, the average reading for the Oct-Dec quarter remained in growth terrain, thereby suggesting a positive contribution from the sector to overall GDP in Q3 FY16/17. With the window for exchanging notes having closed at the end of December, January data will be key in showing whether the sector will see a quick rebound.”
Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said “The manufacturing sector ended 2016 on a buoyant note, with promising signs that growth could pick up further in 2017. The pace of growth signalled by the PMI in December was the strongest for almost two years, and the combination of improving current demand and optimism for a further upturn in 2017 prompted companies to build inventory and boost capacity. The latter was reflected in the largest rise in factory payroll numbers for one and a half years. The upturn is being driven almost entirely by rising demand from domestic customers, with exports stymied by the dollar’s recent surge. The improvement in the survey data raises hopes that the official data will soon likewise show signs of the manufacturing sector’s recent malaise lifting. The latest official data showed manufacturing output stagnant compared to the start of the year, but the December PMI is consistent with production growing at an annualised rate approaching 4%.”
Commenting on the Russia Manufacturing PMI survey data, Samuel Agass, Economist at IHS Markit, which compiles the survey, said “Russia’s manufacturing upturn continued to gain momentum in December, as the sector saw the strongest improvement in business conditions for 69 months. A healthier labour market, substantial production growth and robust domestic demand fuelled economic growth and provided goods producers with the best possible end to 2016. Consequently, this month’s performance capped off the strongest quarter in over five-and-a-half years and was a far cry from the faltering start of the year. Employment returning to growth was a huge boost for the sector and rectified the main negative from November’s PMI data. In fact, job creation was the quickest since March 2011 and highlighted businesses’ intent on supporting this current uptick in demand. Yet with backlogs of work edging closer to stabilisation, firms may be reluctant to add to payrolls at a sharper pace at the beginning of 2017.”
Commenting on the South Korean Manufacturing PMI survey data, Amy Brownbill, Economist at IHS Markit, which compiles the survey, said “The end of 2016 showed signs that the South Korean manufacturing sector had come through the worst of its downturn. Both production and new orders declined at weaker rates, while international demand increased for the first time in five months. Moreover, international demand rose at the sharpest rate in nearly two years, helped partly by the weakness of the South Korean won against the US dollar. However, the weakness of the local currency did not bode well for manufacturers’ costs burdens, as greater imported raw material costs drove up input prices to the greatest extent in over five-and-a-half years.”
Source: STEELGURU