Composite PMIs Weaken in June

Among the 25 countries/regions reporting composite PMIs that reflect the manufacturing and services sectors of their respective economies, only four show improvement in June. Those four are Russia, Saudi Arabia, United Arab Emirates, and Egypt. The domination of oil producers on the list is notable. We mark Zambia as unchanged as its data are unavailable in June. We use the May value for June only in the case of Zambia. This overall result is a substantial step-down and worsening from May when only 13 reporters logged worsening. In April, only 7 had cited a worsening.

The sequential averages show worsening over 3-months compared to 6-months in only seven reporters, a worsening at 6-months compared to 12-months for only five reporters and a worsening over 12-months compared to 12-months ago in 14 reporters.

Some weakening The month’s data are sharply weaker (month-to-month), showing much more breadth of weakening than what we've seen in some time although the PMI averages have not so sharply deteriorated. The average PMI stands at 52.1 in June and the 12-month average is 51.5. That compares to a 3-month average at 53.0; its 6-month average is at 52.3. This sequence shows improving PMI averages over shorter, timelier, periods (except month-to-month). The medians also show improvements from 51 over 12 months to 52.3 over 6 months to 53.0 over 3 months. However, in the month-to-month data, the April reading is 53.8, rising to 54.0 in May and then dropping to 51.5 in June. The median and the averages both show a fall-off in June; however, the PMI values remain above 50 indicating economic expansion based upon the comprehensive composite PMI readings.

Little contraction PMI readings show composite PMI is below 50 in June indicating contraction for only five countries; that compares to three in May and three in April. For the three-month average, there's only three weaker compared to six-months; for the six-month average there's only three weaker than over 12 months. For the 12-month average, there's only five weaker than a year-ago. While there is great concern about a coming global slowdown and potentially a global recession based upon composite PMIs, there aren't many countries or regions now that are experiencing contraction.

Much weakening in June On a month-to-month basis, there's a much more significant indication of slowing with 20 of 25 reporters showing weaker values in June compared to May. That compares to 13 in May compared to April and 6 for April compared to March. Over three months there are seven out of 25 that show weakening compared to six months; over six months there are five that show weakening compared to 12 months, but over 12 there are 18 that show weakening compared to 12-months ago. Even so, we can see that the tendency for weakening is mostly a month-to-month phenomenon that has emerged in June. It is not yet indicative of the broader trends.

Standings are weak and mixed The queue percentile standings place the current observations in an ordered queue of data back to January 2019; it shows the average standing at the 53.4 percentile mark and a median standing at the 50-percentile mark. That means that the median for the group over the period is at such a level that it corresponds to the median value for each reporter on average. There are 12 of 25 of the reporters with composites below the historic medians on this timeline.

The monthly message The data indicate that there is subpar growth period in progress for just about half of the reporters with 12 of 25 showing below median results and with one country Spain exactly on top of its median at a 50-percentile queue standing. The PMIs suggest that we see two things, that growth is below what has been the median period, and that there's the added problem that the large countries tend to show some of the weakest percentile standings with France showing a 13-percentile standing, Germany at 29.6 percentiles standing and the entire European Monetary Union at 33.3 percentile standing. Sweden has a 3.7 percentile standing. On the other hand, some of the strongest standings come from Russia at 90.7%, India at 96.3%, Saudi Arabia at 94.4%, UAE at 92.6%, and Zambia at 94.4%. Japan is one of the few large countries with the high percentile standing at its 85.2 percentile.

For now, weakness is concentrated in the large economies and the worry about that is that it will spread. We certainly would not expect resilience in the smaller economies to prop up the larger economies. And while the trending data are not uniformly negative, the extreme breadth of the weakness in June is something to worry about.