Global manufacturing sentiment off to weak start in Q2 2017, says Barclays

Barclays global manufacturing sentiment index dropped in April to 0.10 from March’s 0.23. The fall was mainly due to a drop in the headline manufacturing PMI prints in the U.S. and China. But some of this softness was countered by a rebound in U.K.’s manufacturing sentiment and a robust report from the euro area.

Taking a closer look of the country-level PMI reports indicate that manufacturing sentiment in the U.S. continues to be solid and therefore the fall in April is not a particular cause of worry. But the decline in China’s PMI implies a downside risk to Chinese economic growth. There is concern relating to the optimism seen amongst U.K. companies over domestic demand given several factors that might work against the consumer sector, such as the real income squeeze and the possibly weakening in unsecured credit growth ahead.

“Looking at the subcomponents, our global new orders gauge slipped to 0.02 in April (prev.: 0.32) while new export orders edged only slightly lower to 0.49 (prev.: 0.53), suggesting that weakness was domestically driven”, added Barclays.

The forward-looking measure of new orders excluding finished goods inventories dropped to -0.08, mainly due to inventory accumulation and a decline in new orders. The global input prices gauge weakened to 0.33 from 0.49, implying some easing in cost pressures.

In all, global manufacturing sentiment is off to a weak start in the second quarter of this year, following a solid showing in the first quarter, according to Barclays.