Manufacturing PMI rises to 60.9 in June, job creation fastest in 18 years: Survey

“The composite output index rose further in June, supported by an increase in new orders, leading firms to increase hiring in both sectors. Input prices moderated slightly in June, resulting in improvement in margins, particularly for manufacturing firms,” the survey said.

While robust demand conditions are keeping business activity elevated, the outlook for future activity dropped sharply, it said.

Manufacturers and service providers, combined, saw their output rise. Of the two, the bigger boost came from manufacturers, the HSBC survey said. The composite flash PMI ticked up in June, supported by rises in both the manufacturing and service sectors, with the former recording a faster pace of growth, said Maitreyi Das, global economist at HSBC.

It said new orders rose by almost one percentage point, primarily led by domestic orders. Mirroring the trend in output, new orders rose at a quicker pace for manufacturers than for service providers. “Meanwhile, new export orders slowed in June, but remained at a much higher level compared to their historical average. Service-related firms fared better than manufacturers in terms of international demand. Panellists noted broad-based gains from Africa, Asia, Australia, the Americas, Europe and the Middle East,” it said.

Rising demand resulted in capacity pressures. As a result, both manufacturing and service firms increased their staffing levels and input buying activity. In fact, the pace of job creation was the fastest in over 18 years, the survey said.

The PMI survey said the good news is that input cost inflation moderated in June and came in below long-term average. Both manufacturers and service providers saw moderation in input price pressures. However, overall price levels remain elevated with survey respondents citing higher labour and material costs, particularly for food, steel and electronics. Output prices moderated a tad, with divergence between the manufacturing and service sector: the former saw a rise in output prices, while the latter saw a moderation, it said.

“Corporate margins improved in June. Both the manufacturing and service sectors saw margin improvement as input costs moderated. However, manufacturing firms were able to pass on a part of their input costs to customers, resulting in higher gains in corporate margins,” it said.

“However, we should remain slightly cautious as the future output index fell sharply. The overall degree of optimism weakened to a three-month low, but remained above the series average. Private sector firms believe that marketing efforts are likely to help sustain the momentum in demand,” the HSBC survey said.