By Daniel Hunter

The global manufacturing sector made a subdued start to the third quarter. At 50.8 in July, the JPMorgan Global Manufacturing PMI — a composite index produced by JPMorgan and Markit in association with ISM and IFPSM — remained only slightly above the no-change mark of 50.0.

Rates of expansion in production and new orders were broadly unchanged from the modest levels signalled during the second quarter of the year. July nonetheless saw output and new orders rise for the ninth and seventh successive months respectively.

National PMI suggested that the Asia region was the main drag on global manufacturing growth during July. Production volumes declined in China, India, Taiwan, South Korea and Vietnam, stagnated in Indonesia, while growth slowed to a five-month low in Japan. Elsewhere, Spain, Brazil, Russia, Mexico, Australia and Greece also reported contractions.

In contrast, output growth hit a four-month high in the US, near two-and-a-half year high in the UK and returned to expansion for the first time since February 2012 in the eurozone. Eastern Europe also faired better, with production rising in both Poland and the Czech Republic. The upturn in Canada extended into its third successive month.

The level of new export orders — an indicator of international trade flows — rose for the fourth time in the past five months, although only slightly. Growth of new export business was registered in the US, the eurozone, Japan, Canada, India, Poland, Czech Republic, Singapore and Russia.

Global manufacturing employment was broadly unchanged in July, as the labour market maintained its tepid performance. Job creation in North America, the UK, India, Taiwan, Turkey, Czech Republic, Ireland, Singapore and Indonesia was offset by losses in the other nations covered by the survey.

Price pressures also remained relatively subdued in July. Although cost inflation accelerated to a four-month high, it was below the long-run survey average. Meanwhile, average output charges declined slightly over the month. Stocks of both finished products and raw materials also showed further decreases during the latest survey period.

"Global manufacturing output continues to expand at a modest pace, consistent with a global economy that is held back from considerable fiscal drags in the first half of the year," Joe Lupton, Senior Economist at JPMorgan, said.

"However, the survey reading showing a sharp move down in the pace of stockbuilding is an encouraging sign that the recent period of soft growth in production alongside somewhat stronger gains in final demand is making for a leaner inventory backdrop and setting the stage for some lift heading into the second half of the year.”

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