July 1, 2008 / 3:40 PM / 11 years ago

Global manufacturing PMI slips into contraction in June

LONDON, July 1 (Reuters) - Global manufacturing activity slipped into contraction for the first time in five years in June while input prices hit a new 10-year high as soaring energy costs continued to bite, a report showed on Tuesday.

The JP Morgan Global Manufacturing PMI, compiled with research and supply management organisations, fell to 49.5 in June from May’s 50.4.

This is below the 50.0 mark that divides growth from contraction.

“Manufacturers, especially those in the advanced economies, are being hit by a sharp downshift in demand at a time when cost inflation remains persistently high,” said David Hensley, director of global economics coordination at JP Morgan.

“Conditions are unlikely to improve significantly during the third quarter,” he added.

The index comes after data showed U.S. factory activity expanded in June after four months of contraction while China and India remained at expansionary levels.

However, this was offset by activity sliding into contraction in the euro zone for the first time in three years and weaker conditions in Japan. Britain’s manufacturing sector contracted at its sharpest rate since December 2001.

Global input prices hit 80.1, the highest since the survey began in 1998 and considerably higher than May’s 76.3, as soaring oil, energy, commodity and food prices all took their toll.

The employment index fell to 48.0 from May’s 49.2 as companies trimmed non-essential staff in subdued market conditions and to offset part of the rise in costs.

The index combines survey data from countries including the United States, Japan, Germany, France, Britain, China and Russia. (Reporting by Jonathan Cable; editing by Stephen Nisbet)

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