Global Manufacturing Readings Still Weak

The ongoing US-China trade war has taken a heavy toll on global trade over the last two years.

Worldwide, manufacturing readings have been trending lower across developed and emerging economies alike.

In the G10 bloc, the downturn in manufacturing readings has been hitting record lows in the US, UK, and the eurozone over the summer and into Q3.

The readings for last month are just starting to come in. These have shown that, while there is some improvement noted, activity remains very subdued and conditions are fragile.


The IHS Markit Manufacturing index for the US showed the factory sector recovering over November. It moved up to 7-month highs at 52.2. This was a strong increase from October’s 51.3 reading.

The increase has been attributed to a firm rise in the new orders component of the index, indicating better optimism over the last month. Rising hopes of a US-China trade deal are the main driver of this better outlook. However, with no signed deal yet, a further downturn remains a risk.

While the IHS Markit reading is in positive territory, the key focus will be on the ISM number due later this month. In October, the reading was still in contractionary territory at 48.3. Traders will now be keen to see whether the ISM reading was able to recover into positive territory over the month or whether the sector is still below the neutral level.


In the UK, the IHS Markit reading was not so positive. The UK manufacturing sector fell further into contractionary territory at 48.3 from 49.6.

The UK is facing a more complicated picture given not only external pressure from the trade war but also threats from Brexit. And now, the added factor of a domestic election.

The uncertainty over Brexit this year has been a heavy source of downward pressure on economic activity. And, this latest reading is further evidence of the damaging impact of Brexit.

Eurozone PMIs

As with the US, the eurozone also saw a recovery in manufacturing activity last month. However, at just 46.6, the index is still well below the neutral level. This highlights the weakness seen across the single customs union.

The ECB is closely watching the downturn in activity. Traders are doing the same, and they are expecting the ECB to ease further. The heart of the eurozone economy, the German manufacturing sector, has trended heavily lower this year.

This is as a result of weaker global conditions as well as tariffs on eurozone exports. The latest readings showed the German manufacturing sector picked up over the last month. However, again, at just 43.8, the sector remains perilously weak. Therefore, we cannot rule out a further move lower.

Technical Perspective


The direction of global manufacturing is highly important to crude oil given that a large portion of demand for oil is tied to manufacturing.

Crude prices continue to grind higher within the recent bullish channel. However, price action remains choppy, labored, and vulnerable to reversal.

The 60 level resistance is the top of the recent range. This could prove to be the end of the current rally, seeing sellers taking price back lower, as the rotational play continues. To the downside, the rising channel bottom is the first support ahead of the 55 level.

About the Author
“John Benjamin Resident Analyst at Orbex. John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.” [space height="10"] At Orbex, we are dedicated to serving our clients responsibly with the latest innovations in forex tools and resources to assist you in trading. Please Director at Visit our site for more details.

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