After drifting to the lowest level in two years in April, the Barclays global manufacturing confidence will likely mark a small uptick in May, according to the initial estimate which is based on the ‘flash’ PMI readings from the US, euro area, China and Japan. However, despite tentatively improving from -0.53 (final April reading) to -0.50, May industrial production momentum has likely weakened further in China and is unchanged at best in the US, while the improvement in the global index was mainly due to a strong rebound in Japan’s index and a small uptick in the euro area’s, according to the ‘flash’ readings. In addition, the more forward looking series of the global normalized gap between new orders and finished goods inventories fell to -0.68 from a final reading of -0.62 in April – as new orders fell quite significantly in the US (but moderately improved elsewhere) and aggregate inventories rose a second consecutive month – signaling additional deterioration might be in the pipeline.The US ‘flash’ PMI manufacturing came in at 53.8 in May, down from a final reading of 54.1 in April and below market expectations, driven primarily by a decline in new orders (to 54.2 from 55.3), as well as a small decline in output, while the employment and prices components increased.The euro area ‘flash’ PMI manufacturing modestly surprised on the upside (albeit the composite disappointed on unexpectedly lower service sector performance), coming in at 52.3 vs. 52.0 in April, as French manufacturing improved to 49.3 (still contracting, but at a slower pace), while German manufacturing came in slightly weaker than expected at 51.4.At the regional level, the main improvement came from stronger new orders, which suggest an improvement to 52.6 from 51.8 in April.In China, the ‘flash’ manufacturing PMI suggests another leg down in manufacturing momentum. The headline ‘flash’ series was largely flat at 49.1, thus, despite showing a modest improvement from the final reading in April (48.9), the still well-below-50 reading implies that subdued activity continued in May. This was mostly attributed to a fall in total output, while new orders, and particularly new export orders, continued contacting as well .In Japan, the ‘flash’ PMI manufacturing showed a tentative strong rebound in May, as the headline index indicated expansion in activity after a pause in April, at 50.9 (vs. final reading of 49.9 in April). The more notable and promising improvement is pointed out by the gap between new orders and inventories, which has likely bounced to 3.3 (from -1.8 in April) as companies reported a strong boost to new orders in parallel with significant destocking.
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