Composite and Services PMIs Show Momentum Loss

The total, or composite PMI from Markit in March, generally weakened. In Europe, for the EMU and its largest economies, there was month-to-month weakness across the board. But in the U.S., the Markit composite index moved up to 57.7 from 55.9. For 19 key countries, the composite PMI slowed in 13 of them with four of them posting PMI values below 50, indicating economic contraction. This contrasts to February, when only three slowed, and only three posted PMI values below 50. However, the unweighted average for the group of countries has moved from 52 in January to 54.6 in February back down to 53.6 in March. The median similarly shows a move from 51 in January to 55.3 in February backing off the 54.6 in March.

These unweighted trends show a weakness between March and February but still show March levels of activity above those in January. The slowing is broad but not severe.

Sequential data looking at averages over 12 months six months and three months show the average PMI reading falling from 54.6 over 12 months to 54.0 over six months to 53.4 over three months. For the median, the average for the group falls from 55.1 over 12 months to 53.7 over six months staying at 53.7 over three-months.

The evaluation of the level of activity that corresponds to the average and median shows that these countries are in an average percentile standing of their range between 81% and 83%. The 81% to 83% percentile marks a very high position for the high-low range of outcomes for the various reporting countries. However, the queue standing data produce different, weaker, results. The queue data are obtained by ranking each country's current value among its set of values from January 2018 to date expressing the current standing as a percentile standing. So the queue percentile standings are ordinal standings. Viewed in this way, the average queue standing for the group is at its 58.6 percentile while the median is at its 66.7% percentile. That's a reasonably large gap between the average and the median. But for both, these are considerably weaker readings than the high-low percentile standings. What this suggests is that while most of these countries have a percentile standing that are relatively high in their high-low range, when ranked among all observations, countries are much closer to their average and median values.

Still, the data over three months, six months and 12 months, show that there are only between five and two countries over these periods averaging PMI values below 50 indicating economic contraction. For the bulk of countries, growth remains the rule of order. However, there is a clear tendency toward weakening. The 12-month average shows no country weaker than its previous 12-month average. But the six-month average compared to the 12-month average shows weakening in 13 of 19 reporters and over three months there's a weakening in 16 of 19 reporters. While the statistics show a broad weakening, we can see from the data on averages and medians that the weakness is not really very pronounced; it may be broad and consistent, but it's not pronounced.

Wrap up Among the salient trends for March, we find a sharp weakening in Russia's PMI as it falls to 37.7 from 50.8 in the early wake of sanctions. Only Ghana shows its PMI weakening in each of the last three months. Sweden is the only country where the PMI weakens for just two months in a row (March and February). Over three months only Egypt has three readings each below 50 although Russia and Japan come close on that score. Only Brazil shows steady acceleration, improving averages from 12-months to six-months to three-months. Brazil in the only country showing its highest reading since January 2018 (100% percentile standing).

There are sanctions at work that, eventually, may slow growth globally more broadly than just Russia. If China backs Russia, things could get much dicier, especially if the same sort of sanctions are implemented. There is still the virus, and it has continued to hit China hard, as China continues down the road to zero-Covid. And global supply chain issues are still unsolved while central banks grapple with high inflation and take steps to reign it in. The environment still possesses some significant risks. Meanwhile, PMI levels are only moderately firm on average based on queue standing averages.