Global PMI Scorecard: Global growth still strong but moderating

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Manufacturing PMIs

The manufacturing PMIs for March indicate that the pace of the robust global manufacturing sector has moderated. My GDP-weighted PMI for the major economies fell to 56.0 from 58.2 in February.

The pace of expansion in the US eased slightly to a still robust 61.2 in March from 61.4 in February. The pace in the Eurozone also eased to 57.5 from 59.0 in February and easing was widespread. Greece, on the other hand, has seen a moderation of the contraction in its manufacturing sector. The UK’s manufacturing sector moderated relatively sharply from a robust 61.5 to 57.1.

As expected, the expansion in Japan’s manufacturing sector was halted as the impact of the terrible disaster is being felt. After registering its second consecutive month of expansion in February, the manufacturing PMI dropped from 52.9 to 46.4. The huge turnaround in Australia’s manufacturing sector in February came to an abrupt end in March with the PMI falling to 47.9 from 51.1. China’s manufacturing PMI rebounded from 52.2 in February to 53.4 in March, mainly due to seasonal factors. Taiwan failed to follow mainland China, though. The manufacturing sectors in emerging economies generally followed the weaker trend with South Africa (RSA), Russia and India the exceptions.

Sources: Markit; Li & Fung; Kagiso; ISM; Plexus Asset Management.


Manufacturing PMI



Eurozone*57.559.0Expansion moderating, robust
Germany*60.962.7Expansion moderating, robust
France*55.455.7Expansion moderating
Greece*45.442.8Contraction eased
Italy*56.259.0Expansion moderated, robust
Spain*51.652.1Expansion moderated
Ireland*55.756.7Expansion moderated, robust
U.K.*57.161.5Expansion moderated, robust
Australia*47.951.1Contracting again
Emerging Economies
Brazil*53.254.6Expansion moderated
China**53.452.2Seasonal expansion, below trend
Czech*58.659.8Expansion moderated, robust
Poland*54.853.8Expansion accelerated
Turkey*56.158.5Expansion moderated, robust
Russia*55.655.2Expansion accelerated, robust
Taiwan*55.655.8Expansion moderated, robust
RSA***57.254.8Expansion accelerated
S Korea52.853.4Expansion decelerated somewhat
Global****56.058.2Expansion accelerated, robust

Sources: Markit*; Li & Fung**; Kagiso***; Plexus Asset Management****; ISM*****.

Sources: Markit*; Li & Fung**; Plexus Asset Management****; ISM*****.

Where the still relatively robust global manufacturing PMI numbers were likely to lead to improved global industrial production growth through end June, this year a hiccup is facing global industrial production in coming months, especially in light of the tragic events in Japan.

Sources: Markit*; Li & Fung**; Plexus Asset Management****; ISM*****; I-Net Bridge

The immediate outlook for industrial metal prices is therefore cloudy.

Sources: Markit*; Li & Fung**; Plexus Asset Management****; ISM*****; I-Net Bridge.

Non-manufacturing/Services PMIs

The JPMorgan Global Services PMI for March got hammered as it dropped to 54.0 from a robust 59.3 in February.

The ISM non-manufacturing sector in the US eased from a very robust 59.7 in February to 57.3 in March. In the Eurozone the robust services sectors of France and Germany upped the pace again, but elsewhere in the Eurozone the PMIs came in mixed. Spain again fell back into contraction while growth in Ireland’s services sector moderated sharply, finding itself on the brink of contraction.

March was characterised by a significant rebound of the UK services sector as the PMI rose to 57.1 from 52.6 in February. Japan’s services sector took a huge smack as the PMI dropped from 49.8 to 35.3 on the back of the disaster. The contraction in Australia’s services sector again deepened with the PMI falling to 46.5 from 48.7 in February.

In the emerging economies the robust expansion in India’s services sector has moderated slightly. China’s non-manufacturing PMI surged to 60.2 from 44.1 in February – in line with the seasonal pattern.

Sources: CFLP; Plexus Asset Management.

The rate of expansion in Russia’s services sector has steadied while the expansion in Brazil’s has accelerated.

Sources: Markit; CFLP; ISM; Plexus Asset Management.
*Japan is off the screen due to the disaster’s impact on the numbers.


Non-manufacturing/ Services PMI



US57.359.7Expansion moderating, robust
Eurozone57.256.8Expansion accelerating, robust
Germany60.158.6Robust pace accelerated
France60.459.7Robust pace accelerated
Italy53.353.1Expansion accelerated slightly
Spain48.750.8Contracting again
Ireland51.155.1Expansion slowed significantly
UK 57.152.6Expansion accelerated sharply
Japan 35.349.8Severe contraction
Australia 46.548.7Contraction accelerated
Emerging Economies
Brazil53.552.7Expanding faster
China*60.244.1Seasonal acceleration
Russia53.353.4Expansion moderated slightly
JPMorgan Global Services 54.059.3Pace of expansion decelerating

Sources: *Markit; **CFLP, Li & Fung, Plexus; ***ISM, Plexus; ****Markit, Plexus Asset Management.

GDP-weighted/Composite PMIs

On a GDP-weighted/composite basis where the manufacturing and non-manufacturing/services are both taken into account, the growth in global economic activity decelerated sharply in March, taking the JPMorgan Global Composite PMI index from a robust 59.4 in February to 54.7. That compares to 58.3 in January and 57.1 in December last year.


GDP-weighted/ Composite PMI



US***58.460.1Expansion moderating, robust
Eurozone****57.357.4Expansion moderating, robust
UK****57.155.1Expansion accelerated, robust
Japan*36.151.0Contracted severely
Emerging Economies
China**57.547.3Seasonal acceleration
India*60.061.0Expansion moderating, robust
Russia*55.155.2Expansion moderated slightly
Hong Kong*54.953.7Expansion accelerated
UAE*54.754.3Expansion accelerated
JPMorgan Global Composite*54.759.4Expansion moderated 

Sources: *Markit; **CFLP, Li & Fung, Plexus; ***ISM, Plexus; ****Markit, Plexus Asset Management.

Sources: Markit; Li & Fung; ISM; Plexus Asset Management.
*Japan is off the screen due to the disaster’s impact on the numbers.


US economy: GDP-growth accelerating

My GDP-weighted ISM PMI for the US leads US real GDP growth by a quarter. At this stage it continues to indicate first-quarter GDP growth in excess of 3% on a year-ago basis and may even touch 3.5%. If the current robust manufacturing and non-manufacturing PMIs hold up through end June, the year-on-year GDP growth could reach 4% and beyond in the second quarter, barring any fallout from the Japanese disaster, that is.

Sources: ISM; FRED; Plexus Asset Management.

Eurozone: GDP growth to gain momentum in Q2

The PMIs during the fourth quarter of 2010 indicates that GDP growth in the first quarter is likely to come in at approximately 2.5% compared to a year ago and, barring any fallout from the Japanese disaster, to accelerate to 3% in the second quarter.

Sources: Markit (various internet sources); I-Net; Plexus Asset Management.

China: Still going strong!

As I expected, my calculated GDP-weighted PMI for China spiked in February, due to the reversal of the seasonal weakness induced by the Chinese Golden Week. The non-manufacturing PMI for March surprised me on the upside, though. Where I thought that the somewhat weaker trends in January and February were indications that the stricter monetary policies pursued over the past 12 months have started to bite, it seems to me that the PBoC needs to do more to slow the economy.

Sources: CFLP; Plexus Asset Management.

From a forecasting point of view the CFLP manufacturing PMI gives a better picture of underlying GDP growth due to lower seasonality. China’s year-on-year GDP growth of 9.8% in the last quarter of 2010 was in line with my estimate of 10% based on the manufacturing PMI’s trend in that quarter. It is evident to me that China’s year-on-year GDP growth in the first quarter is likely to come in at approximately 10%.

Sources: Dismal Scientist; Li & Fung; Plexus Asset Management.

Japanese economy: To get worse before recovering?

How the Japanese economy will perform over the next few quarters as a result of the disaster is virtually impossible to say. We will have to take our lead from the trend in the manufacturing and services PMIs. In the following graph I have assumed that the manufacturing PMIs for the next three months will come in as follows (March was 46.4): April 40; May 45; and June 50. In this scenario it seems to me that GDP growth in the first quarter will register approximately -1% on a quarter-on-quarter annualised basis. In the second quarter the GDP is likely to shrink by 2% to 3% on the same basis.

Sources: Dismal Scientist; Markit; Plexus Asset Management.

UK economy: Continuing to gain traction…

From my reading of the GDP-weighted PMI the UK grew by approximately 2.0% in the first quarter on a year-on-year basis compared to 1.6% in the fourth quarter of 2010. It is evident that growth in the second quarter will accelerate to approximately 2.5% to 3.0%, barring any fallout from the Japanese disaster.

Sources: Markit; Dismal Scientist; Plexus Asset Management.


While both global manufacturing and non-manufacturing/services PMI numbers continue to be relatively strong, the onset of a declining trend is something to watch closely. The population of black swans in the global pond has now been expanded by the terrible natural disaster in Japan. The geo-political situation in the Middle East and North Africa is not improving, lending support to higher oil prices and increasing price pressures in the global economy. The PBoC has again tightened its monetary policy. The potential contagion of the debt crisis in the Eurozone and the impact of austerity measures on the Eurozone economy are still major uncertainties. These black swans and how they will unfold are likely to influence and prescribe the policies of central bankers globally.

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1 comment to Global PMI Scorecard: Global growth still strong but moderating

  • Doug

    Hey, question, it was most apparent in JP Morgan Global – if you remove Japan from the analysis, I don’t see the moderation. I am not arguing that Japan be invisible, but that Japan will return and others may see a short-term kick from Japan’s absence (OK, there are negatives there too) … What say you?

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