The Latest PMI Numbers are Encouraging

Statistics from the various PMI studies around the world suggest that economic conditions are improving. But it is not happening so fast that anybody should be compelled to go dancing in the streets or forget about the imminent arrival of an inflation threat.

These numbers are generally accurate as far as trending is concerned, although the final numbers may be different from the ones released thus far. Still, at the top of the list of good news reports is that China’s PMI is now above 50 again. There remains some doubt on this number as China is subject to more than one PMI interpretation. The official PMI conducted by the government statisticians has always been more confident than those that have been conducted by Markit or HSBC. Everybody now seems to be on the same page as far as Chinese growth and that the slump in output from the Chinese industrial sector may have finally come to an end. This is important to a great many nations, directly and indirectly.

It is helpful to remember that China has not altered the policy that it started to pursue earlier in the year. There remains a focus on inflation and shifting slightly away from the export sector. This will likely mean slow growth in China for a while longer but at least the PMI indicates that China is not drifting towards deeper recession.

The data that is coming from Europe are equally encouraging, but there are caveats here as well. Germany is now headed for a growth rate this year that is very close to the average they have sported for the last several years. The August number for the euro zone is the best in two years (51.7). Still, the fact is that growth is too slow to really address the grinding economic issues in Europe, so the overall euphoria has been tempered by knowledge of very high unemployment rates and slow growth. The expectations for the year have improved just a little, but there are few illusions of a rapid recovery. After all, though the power nations are doing better, the southern states are still in crisis. There is nothing to suggest that they will be emerging from the morass anytime soon. The surprise has been France, as they had been predicted to join the southern states in crisis but have made some positive strides to start catching up with Germany.

-Armada Corporate Intelligence

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