Diverging trends in Consumer Goods sector remains as Automobiles & Auto Parts weigh on overall performance

S&P Global PMI sector data signalled diverging trends within
the Consumer Goods category, as Automobiles & Auto Parts
weighed on total output despite expansions in the other constituent
parts during March. Moreover, autos manufacturers were one of the
worst performers at the global level with regional sector PMI data
also indicating challenging demand conditions in Europe.

Demand conditions falter in March

New orders received by automobile and auto parts manufacturers
contracted for the fourth successive month in March, according to
S&P Global Sector PMI data, with the pace of decline the
second-fastest since December 2022 at the global level. Subdued
demand conditions reportedly stemmed from a challenging economic
environment domestically and in respective key export markets,
according to panellists.

Looking at the regional breakdown, European autos producers
weighed heavily on the overall performance of the consumer goods
sector. Output and new orders fell markedly. The pace of decline
softened from February’s recent low but remained sharp. In
contrast, Asian automobile and parts manufacturers saw a renewed
rise in new orders in March, following a modest fall in
February.

Meanwhile, demand for household & personal use products
strengthened, as new sales rose at the sharpest pace in just over
two years. At the same time, Beverages & Food saw a softening
in new orders growth, but the pace of expansion was nonetheless the
second-steepest since July 2022.

Though European consumer goods continued to lag Asia and the US,
there were signs of the downturn moderating as the cost of living
squeeze eases. This was underscored by consumer services, where
signs were especially encouraging in Europe. Consumer services
demand continued to rise in Europe, with the rate of growth in
March outpacing that in the US.

Moreover, European consumer services firms’ expectations for
output in the year ahead have surged in recent months, catching up
with the level of confidence in the US, according to the latest PMI
data.

Job losses grow as efforts to cut costs are
prioritised

Turning back to the Automobile & Auto parts sector, muted
demand conditions led firms to assess their outgoings in a more
detailed manner as the first quarter progressed. As a result,
employment at autos manufacturers globally contracted. The rate of
job shedding eased on the month, however, with regional breakdowns
signalling job losses at European automobile and parts producers
drove the decline. In line with the trend seen for new orders,
European autos manufacturers cut employment at a marked rate, with
some looking to scale down work schedules and reduce the number of
contractors used, according to anecdotal evidence.

Supply issues ease, allowing cost pressures to moderate
at autos producers

Meanwhile, supply issues across the automobile & auto parts
industry dissipated in Europe, with supplier lead times falling to
the greatest extent since June 2023 amid some resolution at firms
to challenges regarding the re-routing of shipping to avoid the Red
Sea. That said, disruption continued to hamper manufacturers in
Asia as vendor performance worsened for the sixth month
running.

Easing pressure on supply chains led to a softer increase in
input prices at the global level. The pace of cost inflation was
only marginal and the slowest in four months. At the regional
level, Asian automobiles & auto parts producers saw a further
increase in operating expenses, but European autos manufacturers
saw a sharper drop in input prices. Meanwhile, subdued demand
conditions constrained firms’ ability to pass-through greater costs
to customers, as global factory-gate charges declined for the first
time since July 2020, and at the fastest pace since May of that
year. A quicker decrease in selling prices in Europe was
accompanied by a renewed fall in Asian output charges.

Nevertheless, at the global level, automobile & auto parts
manufacturers were optimistic regarding the outlook for output over
the coming year in March. Producers were among the most upbeat in
just under a year amid hopes of more stable global economic
conditions.