The News: Global Funk Hits Manufacturing

Not long ago, some industrial real estate executives had reason to expect that manufacturing in emerging and mature economies around the world just might be strong enough to pick up some slack from the weakening U.S. manufacturing sector. But as 2008 nears its close, it appears that mature or emerging nations both may lack the industrial muscle to prop up global demand for distribution space and manufacturing and other facilities.Confirming this trend, a monthly global survey of purchasing managers found that the manufacturing sector worldwide last month dropped to the lowest level in its nearly 11-year history. The overall benchmark indicator of the JPMorgan Global Manufacturing Purchasing Managers’ Index dropped from 41 in October to 36.4 in November. A score of 50 indicates conditions that are unchanged from the previous month.JPMorgan Chase & Co. and Markit Economics produce the study in cooperation with the Institute for Supply Management and the International Federation of Purchasing and Supply Management. Results are based on surveys of more than 7,500 purchasing managers in 26 nations that account for 83 percent of the world’s manufacturing output.“The November PMIs confirm that global manufacturing has fallen into a deep and broad-based recession during (the second half of) 2008,” said David Hensley, director of global economics coordination for JPMorgan in a statement accompanying the report. “Indexes tracking output, new orders and employment all sank to record lows, with the contraction in production accelerating to a double-digit rate.”The United States, which has a 30.5 percent share of global gross domestic product, helped push the main benchmark index down by making its worst showing in 26 years. The United Kingdom and continental Europe also sustained their largest-ever drops in both industrial output and new orders. Also worrisome, though, is that emerging economies are feeling the pinch, as well. Output in India, for example, dipped last month after an upturn in October.Of the four indexes that contribute to the overall Purchasing Managers Index benchmark—new orders, input prices, employment and output—the sharpest decline was in the input prices index, which measures the cost of materials used in manufacturing. In only one month, it slipped more than a dozen points, from 48.1 in October to 35.9 last month. Overall, the input prices index has lost almost 45 points since it reached 80.8 four months ago. Among the world’s largest economies, China logged its largest decline in materials purchasing costs since the index started tracking the country in 2004. And in the United States, the purchasing index took its biggest dive since 1949.