Global Economy's Progress 'Solid' in August, But Consistency Hard to Find

The JPMorgan Global All-Industry Output Index (aka: the Manufacturing & Services PMI), produced along with Markit Economics, showed another increase in August to 55.5, up from the 55.1 registered in July. It is the third-highest reading since early 2011. But it would not be accurate to characterize things as anything near consistent regarding various industries and regions.

Gains were found both in manufacturing and services, but the latter provided a noticeably bigger boost to the global economy. A deeper dive into the data shows big differences between regions doing well, including the United States and United Kingdom, and those with "muted performance," like much of Asia and Europe.

"The national data still point to widening diverges between the regions," said JPMorgan Director of Global Economics Coordination David Hensley. He added that "steady progress" in overall growth is expected heading into the fall and "solid gains in new business alongside an increase in backlogs of work also suggest that pipelines are sufficient to at least partly offset any increase in demand headwinds in the short term."

A global sector breakdown showed the biggest one-month PMI gains occurring in commercial and professional services, technology equipment and construction materials. The biggest declines, by sector, between July and August were in the categories of real estate, software and services as well as household and personal use products. Notable, by region, were the steep declines in areas like forest and paper products and construction materials in Asia, while the EU sectors having the worst one-month charge were in banking and finance, tourism and recreation as well as household and personal use products. Both continents are finding rough going in the metals and mining sector as well.

The recovery in the United States, despite the various political wrangling and finger-pointing going into a big election year, appears to be continuing well, according to data. The Markit US Manufacturing PMI reached its highest level since April 2010 (57.9). Though the Markit Services PMI slid slightly to a still very high 59.5 from a red hot July number (60.8), the outlook for services is as strong in the US as it has been at perhaps anytime this decade.

The following are other interesting notes from data released this month from Markit Economics:
  • The Markit Eurozone Composite PMI remained in expansion territory, but dipped in August. The impressive all-sector output growth rebounds in Ireland (a 168-month high) and Spain (an 89-month high) could not counter disappointment in Germany and Italy, both tracking at their lowest points since late last year, or France, which remains in contraction territory despite being Europe’s second biggest economy. Tensions in the Ukraine are putting a major drag on a rebound with which people were just starting to finally trust.
  • The Markit/JMMA Japan Manufacturing PMI reached a five-month high, in part because of strong exporting activity. But the service sector PMI fell slightly and resides just below the index mark that divides contraction and expansion (50).  
As for emerging markets:
  • The HSBC Brazil Manufacturing PMI saw operating conditions improve for the first time in five months, though little optimism is being reported for continued improvements. Its service-side PMI also fell for the fifth consecutive month. 
  • The HSBC China Manufacturing PMI saw operating conditions improve at the slowest pace in the last quarter, with weaker expansion of both output and new orders as well as intensified staffing cuts.
  • The HSBC Manufacturing PMI for India in August fell only slightly short of matching July’s 17-month high on robust growth in new business from abroad and a noticeable easing of inflationary pressures, which have been an ongoing issue there.
  • The HSBC Mexico Manufacturing PMI saw solid improvement for Mexico on the best output growth and staffing increases in about three months. The short-lived drop in manufacturing activity in July is thought to be a blip, and confidence remains high on strong incoming new orders. 
  • The HSBC Turkey Manufacturing PMI finally started to stabilize in August and reentered expansion territory, with output growth and orders from export markets rising. Analysts, however, believe that subdued growth in the EU and growing unrest in the Middle East will stymie any kind of rapid improvement in foreign demand into early 2015.

1 comment:

  1. A few years back there was a steep increase in China's imported goods, largely due to the import tariff policy of China. However, charging high tariffs was not seen as a welcome move and the Chinese administration was recommended a significant reduction in the same for the betterment of the economy. Today, a remarkable global progress has been made in easing the import tariff of China. China is said to have reduced import tariffs on a few raw materials which has helped the revival of China's steel, fertilizer and textile industries during the economic slump.

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