Global Total PMIs Remain Weak and Back Down in January; New Year- Same Old Story

Conditions this month remain mixed and weak. It’s a relatively robust overview and one we have been reporting for some time.

The Process It is always difficult to evaluate and to summarize global data because, of course, different countries and regions are always doing different things. An aggregation of data leads to some weighting process which will cause the evaluation of world events to turn on how the largest countries, populations, or economies, are doing. My evaluation of this data set will turn on looking at the medians or the averages for the reporting country PMIs as well as looking at diffusion data which tell us how broadly the various respondent countries are performing. These data are supplemented by percentile ranking or standing data that will tell us where the current month’s reading stands relative to observations since January 2021. Together we will get a more complete picture of how countries – and the global economy- generally are faring. This approach will generate a set of data to help understand individual countries in a global context rather than a context that will simply focus most on the largest countries.

Having made those points, looking at the sequential data at the top of the table, we can see that the group of Western economies including the United States, the European Monetary Union, and its four largest economies, generally are better than they were 12-months ago and worse over 6 months than they are generally over 12 months and also generally worse over 3 months than they were over six months so large economies are generally dragging these results down over recent monthly data. November showed broad weakness, December showed a broad rebound among the large economies compared to November, and now in January there is backtracking again with mixed results.

The summary data at the bottom of the table showed that the overall median gain for the 25-country sample is generally eroding but not very rapidly from 51.7 in November, to 51.1 in December, to 50.9 in January. This is a stepwise erosion but it's also a relatively modest erosion. The median also steps down from the 12-months to 6-months to 3-months (averages), once again, falling at a snail's pace with the 12-month median at 51.5 and the 3-month median at 51.1. Conditions really are much more static than weakening but these are still relatively weak responses. For example, the far-right hand column is the queue standing which positions the January data in a queue of data since January 2021. On that basis, the January median has a ranking that averages at its 42.9 percentile; the average standing for the group has a ranking in the 44.9 percentile- both of these figures, of course, are below 50% which means they're below their median for that period of time. The average standing for the U.S., the U.K. and the European Monetary Union is 38.8%, slightly weaker than for the group as a whole. The BRIC countries that at one point were pushing a great deal of strength now have a 25.2 percentile standing -with Russia excluded- but those raw diffusion readings are still higher than the unweighted readings for the U.S., U.K., and the European Monetary Union. This simply underscores the fact that the BRIC countries have been doing relatively well.

The persisting good news in this report in January is that there are only 5 jurisdictions with composite PMI readings below 50, which means only five countries or areas in which conditions were actually contracting. That compares to six in December and seven in November so that on a monthly basis there's been a slight move to having fewer countries experiencing economic contraction. However, it's not a particularly broad movement since the 12-month, 6-month, and 3-month averages are fairly stable, counting five to six countries in the declining category over broad period. However, looking at the ranking data more broadly the queue percentile standing shows 16 countries below a ranking of 50 for the queue percentiles. For rankings data ‘50’ does not enshrine the difference between rising and falling for output; rather it designates the median for the period, so the bulk of countries are below their medians although very few countries are contracting.

At the bottom of the table, we look to see the proportion of countries that are slowing. Over January and December slightly more than half are slowing although in November fewer than half were slowing only 44%. The 12-month, 6-month, and 3-month averages that compared 12-months to 12-months ago six-months to the 12-month results and 3-months to the six-month result show that slowdown is broadening with slowing evident in 43.5% of countries over 12 months, rising to 69.6% over 6 months and holding at 60.9% over 3 months.

While contractions are unusual, slowing is not unusual. In fact, in January we see a good deal of slowing still underway but the big change being that in December the large, developed economies are all doing better and then in January they're mixed.

Central banks are still largely engaged in easing programs that are probably still in gear. The ECB may be slowing its pace; the Federal Reserve has actually moved to a pause. The Bank of Japan has been on a different page, and it's been raising rates.

The queue percentile standings show us that the large, developed, economies are well below their medians except for Spain. Only Egypt in Saudi Arabia have readings in their 90th percentile and for both of them these are the strongest readings they've seen since January 2021. However, Zambia and Russia also have queue standings in their 80th percentile range, although, for Russia, we have to observe this reported number with some suspicion. There's exceptional weakness for Brazil and for Singapore with rankings on the lower 4th percentile and also for Qatar and for Ghana with rankings below their 20th percentile. Global conditions remain quite erratic Interestingly, if we rank the PMI responses for the last three months against each other, as well for the three sequential periods of 3-months, 6-months and 12-months. All in all, it is another disappointing report but not a dismal one.