Globally Total PMIs Slow But Continue to Signal Growth

The total or composite S&P PMIs for July saw worsening as the global PMI is worsening, emerging markets are worsening, developed markets are worsening and are the weakest of all. This follows a similar performance in June when all three groups showed deterioration although May showed improvement for all three groups.

Sequentially, over 3 months, all three of these groups are worsening, over 6 months they're all improving, and over 12 months the overall and developed markets are worsening while emerging markets are improving.

The queue percentile standings show the global PMI with a 42.9 percentile standing, marking it below its 50th percentile and therefore below its median. The HSBC emerging market index has a 67.3 percentile standing, nudging it up into the top one-third in terms of historic standings. Developed markets have a 24.5 percentile standing, sending them to the bottom quartile of their range. This matrix of data portrays overall poor results for the global economy.

Table 2 provides us with some detail and analytics. The U.S., U.K., and EMU unweighted composite PMI for July slipped to 50.5 from 52.1 in June while June slipped to 52.1 from 54.0 in May. These western developed economies show an unweighted average of 50.3 over 12 months, rising to 52.6 over 6 months and slipping back to 52.2 over 3 months. The queue percentile standing for the group is a 32.7 standing which places it just inside the lower third of its historic queue of data.

The BRIC standings are without Russia, which I guess makes them BIC standings; they deteriorate from 56.0 in May to 54.8 in June and to 54.5 in July. Over a longer time-series, the trend is exactly opposite with a 12-month average of 53.3, rising to 54.9 over 6 months and rising again to 55.0 over 3 months.

Even so the overall average and overall median results show a clear pattern of monthly deterioration from May to June to July. The sequential average figures show 51.4 for the 12-month average, rising to 52.4 over 6 months and deteriorating to 52.2 over 3 months. The median shows a weaker 50.9 over 12 months, rising to 52.2 over 6 months and then falling back to 51.2 over 3 months. In the case of both summary statistics, there is an improvement over 6 months compared to 12 months, then a setback over 3 months compared to 6 months but stronger readings over 3 months compared to 12 months. The average reading for the overall S&P reporters has a 44.7 percentile standing while the median for the group has a 40.7 percentile standing; these are essentially the same readings in terms of standings.

Individual pattern developments Looking at the individual patterns a little bit more closely, among the twenty-five individual reporters in the table, only nine of them show composite readings below 50 in July: that's a step up from five in June and three in May. Sequentially, over 3 months there are five with readings below 50, there are four below 50 over 6 months but there are seven below 50 over 12 months. The sequential patterns show some improvement on this metric.

Momentum The momentum picture is negative, but July shows 19 of 25 with deteriorating momentum; that compares to 21 in June and 13 in May. All these month-to-month readings show a preponderance of slippage. Sequentially, 18 of 25 reporters have weaker readings on the 12-month average compared to the previous 12-month average. However over 6 months, only five show tendency to slow while over 3 months, fifteen of twenty-five demonstrate slowing.

Queue standings The final column gives us the queue standings which places the current reading in a queue of data back to January 2019. On this basis, the average queue standing is in its 44.7 percentile with the median at its 40.7 percentile. Both statistics say the group as a whole is below its historic median which would be at a reading up 50%; however, readings are not dramatically below 50%. The U.S., U.K., and EMU, on the other hand, have a 32.7 queue percentile standing, in the lower one-third of their data queue - that is a weak position. The BICs have a 62-percentile standing which is above the median reading. On balance, there are sixteen reporting jurisdictions below the 50% mark.

These data paint a picture of some continued deterioration; however, based on the composites, the current queue standings are not terrible but they're not encouraging. The summary standings and the JP Morgan global PMI comes out at 42.9%, similar to our average and median statistics for the group. HSBC emerging markets follow the ranking that we find for the BIC group at 67.3%, just barely in the top third of their queue values. And the developed economies emerge as the weakest group which we can also see from the individual ranking data at the top of the data grid for the U.S., the European Monetary Union, and for the EMU individual members. However, looking down the table to Japan, we see a much stronger story with an 85.2 percentile standing. But Japan is quite unusual in that regard. There are only nine out of twenty-five reporters with percentile standings above the 50th percent mark and there are only four reporters with standings and their 80th percentile or higher. Interestingly, India this month comes in with its highest standing ever on this period.

Economists and investors are trying to sort out the macroeconomics of the current situation. This remains complicated with inflation remaining too high across the board but with growth slowing. Growth in the developed economies is much slower than in the developing world, that clearly is not a sustainable division. The Bank of England just finished a round of rate increases from money center advanced economies. And while inflation has been slowing, core inflation has been slowing at a snail’s pace and has not yet deterred central banks raising interest rates. Meanwhile, in the U.S., Federal Reserve economists have taken recession off the table; it's clear that growth conditions globally remain challenged, and that inflation has not come into balance fast enough to put central banks on hold. The risks to the economy, therefore, are idiosyncratically described, and they depend on the analyst and how that analyst sees the future and handicaps central bank aggressiveness, the growth outlook, and the potential for inflation to come into balance. All that means markets really don't have a consensus and they remain somewhat confused and are receiving different advice from different quarters.