Theme of the Day: Global manufacturing production rises at quicker pace amid boost from price and supply concerns

Output growth at near five-year high, boosted by clients front-loading orders to avoid rising prices and supply delays,inputcosts rise at fastest pace since Jun 2022. PMI data signalled that growth of global manufacturing production accelerated to a near five-year high in May. There remained doubts about sustaining the upturn, however, amid reports of clients front-loading purchases to mitigate expected price rises and supply chain disruption. The J.P. Morgan Global Manufacturing PMI posted 52.6 in May, unchanged from Apr, to remain above its neutral 50.0 mark for the tenth successive month. All five of the PMI sub-components (new orders, output, employment, suppliers' delivery times, andstocks of purchases) were at levels normally consistent with improved operating conditions. Manufacturing production increased for the tenth month running in May, with the rate of expansion the fastest since Jul 2021. Output rose across the consumer, intermediate and investment goods industries, hitting 58- and 53-month highs in the latter two respectively (growth slowed slightly in the consumer category). The steepest expansion overall was at investment goods producers. US output growth hit its highest rate for just over four years in May, and the past two months have seen gains among the largest since late-2021 in Japan. The solid expansion in mainland China was among the strongest for two years. The upturn in the eurozone was meanwhile modest in comparison. The rest of Asia saw (on average) sustained strong output growth in May. The latest expansion of production volumes was mainly driven by rising new work intakes. Incoming new business rose for the fifth month running and at a pace close to Apr's 50-month high. Employment also rose slightly following back-to-back reductions in Mar and Apr. While the data therefore point to encouraging resilience of the manufacturing economy as the war in the Middle East extended into its third month in May, growth in many cases was buoyed by precautionary stock building as companies sought to buy goods ahead of supply shortages or price rises linked to the war. Business optimism also dipped to a seven month low. Purchasing activity among manufacturers rose at the quickest pace since Mar 2022, leading to the fastest build-up of input stocks for 45 months. Stocks of finished goods also showed little change compared to levels one month earlier. Average input prices rose to the greatest extent in almost four years, with accelerations in regions such as theUS, theeuro area andJapan more than offsetting weaker cost increases in nations including mainland China, India, and South Korea. Average selling prices also rose sharply, with the rate of increase staying close to Apr's 45-month high. Supply chains remained under substantial duress, with lead times lengthening to the same degree as in the prior survey month (which was itself the steepest increase since Aug 2022).