New S&P Global PMI™ Comment Trackers provide unique insights
into the key macroeconomic trends shaping the global economy. The
trackers are derived from qualitative evidence provided by PMI
survey panellists around the world, including the perceived impact
of changing supply chain conditions, price and demand drivers and
recession risk.
Calculating the trackers
Alongside the standard response data to S&P Global’s monthly
Purchasing Managers’ Index™ (PMI) business surveys, companies are
invited to provide additional qualitative information on the
reasons as to why these variables (such as output, new orders and
employment) have changed from the previous month. A panel comments
tool tracks the frequency of words or phrases mentioned in these
qualitative replies.
Every index is calculated as a multiple of its long run average,
which is set equal to a value of 1.0. A reading of 5.0, for
example, therefore suggest that the issue being tracked is being
mentioned by survey participants five times more than average.
Supply shortages throughout the pandemic
One important use of the Global PMI Comment Trackers has been
the gaining of additional insights into supply chain conditions,
which have been heavily affected over the last two years by the
COVID-19 pandemic.
Repeated lockdowns and stoppages of factory lines led to
unprecedented shortages of raw materials and components, while
staff absences and lower participation rates have left many
countries with limited labour availability, both of which have
often constrained production at manufacturers.
Chart 1 looks at our new Input Shortages trackers, which
calculate the frequency of comments from global manufacturing
survey panellists that mention a reduction in output or a rise in
backlogs due to shortage of inputs, including materials, staff,
utilities and more. The ‘All Inputs’ index peaked at approximately
4.51 in November 2021, signalling that global shortages were
roughly 4.5 times the normal amount at their peak following
repeated global lockdowns. In August 2022, the index fell to 2.22,
suggesting that, whilst overall shortages were still well above
normal, they had roughly halved since their peak.
Similar findings were seen for both material and staff
shortages. The Material Shortages index peaked at 5.48 in October
last year, before dropping to a 15-month low of 2.96 in July, with
an intervening spike due to the onset of the Russia-Ukraine war.
Although rising to 3.44 in August, the index suggests that relaxed
COVID-19 restrictions and improved factory output helped to loosen
a tight commodities market.
Staff shortages have also eased from their peak in January 2022,
when rapid COVID-19 infections due to the Omicron strain led to
widespread absences and re-tightened government stringency
measures. Since hitting 4.08 at the start of the year, the index
dropped to a 15-month low of 1.85 in July, and 2.04 in August,
signalling that labour availability had improved but remained
stretched compared to historical trends.
Shipping congestion eases rapidly
The Global PMI Comment Tracker dataset can also help to
understand the extent to which manufacturers are facing delays on
shipping as a lingering result of the pandemic. While PMI
manufacturing surveys look at suppliers’ delivery times in general,
these new data dig deeper into the contributing factors and give a
leading indication about the state of shipment congestion.
Looking at chart 2, the Shipping Delays index suggests that
global freight was most heavily congested in the second half of
2021, with examples seen in Europe and the west coast of the USA as
backlogs of cargo ships at large ports reached all-time highs.
Since then, with the gradual roll-back of COVID-19 measures
(barring China’s continued zero-COVID policy), the index has fallen
sharply, reaching a near two-year low of 3.18 in August. While
still marked, the indicated degree of shipping congestion has
improved dramatically this year to offer encouraging signs for
companies that supply chains are improving, which is also helping
to stem material and freight price inflation.
Stockpiling efforts diminish as supply conditions
improve and demand wavers
As well as tracking supply chain conditions, the PMI Comment
Tracker dataset can also be used to discover how firms’ inventory
strategies have changed as a result of these conditions.
One element recorded throughout the pandemic was a gradual
build-up of input purchasing in order to acquire safety stocks in
case of shortages, shutdowns and supplier constraints. Chart 3
shows how manufacturers’ survey responses increasingly mentioned
‘safety stock building’ in 2021 – the index rose steeply throughout
the year to reach a peak of 6.37 last December. In 2022, the
reverse has been true, with the index dropping to 2.68 in August,
as improving material supply and reduced shipping congestion have
alleviated firms’ concerns about future goods availability.
That said, companies also highlighted that concerns about weak
demand in recent months have led to destocking, a factor that could
also be influencing the rapid decrease of safety stock building.
Chart 4 shows that inventories of both pre-production and finished
goods at manufacturers have been increasingly depleted due to
demand softening – mentions on the stocks of purchased goods survey
question reached the highest since April 2009 in July at 2.56 times
the long-run average.
Broader database
The PMI Comment Trackers analysed in this note form only a small
part of the overall dataset, which includes additional indices
tracking the impact of demand shortfalls on global companies, as
well as further indicators on supply shortages, inventories,
inflation and capacity expansion. As well as detailing the impact
of the pandemic over the last two years, these indicators will
provide unique insights into the emerging trends of inflation and
recession in 2022 and beyond.
This dataset is released later in September and will be
available only via subscription. Please contact [email protected]
for further information.
David Owen, Economist, S&P Global Market
Intelligence
Tel: +44 2070 646 237
[email protected]
© 2022, IHS Markit Inc. All rights reserved. Reproduction in
whole or in part without permission is prohibited.
Purchasing Managers’ Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
