PMI Composite Readings Improve Slightly Amid Cross-currents

April readings for the S&P total or composite PMI survey show mixed performance in April with more countries showing deterioration month-to-month than showing improvement, but with the average reading in April higher than the average reading in March. That makes it a bit of a standoff in terms of trying to assess the performance of the survey. More countries are doing worse but on average countries are doing better.

These tendencies are provided without any weighting for the country’s GDP size; that's another caveat. Looking at the United States, the European Monetary Union, and the EMU’s four largest members as though they are all separate and independent observations (which they are not) shows two worsening was in April with the same relative results in March; February shows only one worsening and five improving. Those are certainly good statistics and good news since these are large economies carrying a large weight in terms of their contribution to world output.

In Asia, Japan, and China show different performance with China improving month-to-month in February, March, and April but with Japan worsening month-to-month in April and February but improving in March.

Turning to sequential data that look at averages and changes over three months, six months and 12 months, we find the highly developed European and the U.S. readings all improving over three months; however, four of six of those readings deteriorate over six months compared to 12 months. Three deteriorate and three improve on balance over 12 months compared to the average ending 12 months ago.

We also assess the performance of these countries by looking at their PMIs in a queue of ranked data since January 2020. In that queue, Italy and Spain have 70th percentile standings, above their historic medians (medians occur at a ranking of 50%) along with the European Monetary Union with a 53.1 percentile ranking. However, the United States has a 36.7 percentile ranking, Germany, a 40.8 percentile ranking, and France, a 46.9 percentile ranking; that leaves us with three readings above their median and three below for the full period assessment.

Over the entire sample, the averages from February to March to April cluster in a very tight range from 52.0 to 52.5; the median lies in a range of 51.3 to 52.7. Over those three months, there are 4 of the countries in the survey below a reading of 50 which means they're contracting in April. Six are contracting, in March and six are contracting in February. The averaged data show improvements from three-, six-, and 12-months. On those metrics, nine countries contract over three months, 11 contract over six months, and 11 contract over 12 months.

Turning to statistics on acceleration, we find that 52% of countries are slowing in April but only 44% in March and only 32% in February. The averages are fairly stable; there are deteriorating circumstances in terms of the proportion of countries showing readings below the month before and on a month-to-month basis. Looking at the sequential data for three months compared to six-months, six months compared to 12 months, and 12 months compared to 12-months ago, the percentage of countries slowing steadily diminishes from nearly 70% over 12 months to 56.5% over six months to 30.4% over three months. The broad picture shows less slowing while the monthly picture shows that there may be more slowing creeping into the process.

The average queue standing, which positions these countries in their queue of data since January 2020, is at 51.6%. Across our sample of 25 countries, 12 of them show readings below their respective 50th percentile rankings. This gives us a sense that across the sample based on the ranking data and the average of the PMI data statistics are hovering close to the median for the period. However, this is comparison over a four-year period that has seen a good deal of contraction in play.

On balance, the sense of improvement in this sample is not very strong. There is some progress evident; however, there's still obviously widespread weakness that permeates this system so it's hard to look at the month's data as anything special based upon the composite PMIs. Services sectors show a moderate trend for improvement monthly although stability across the averages from three-, to six-, to 12-months is most evident for services. The services queue percentiles are still relatively robust with an average standing in their 65th percentile. Manufacturing sectors are generally doing worse with an average percentile standing at their 47th percentile, below their medians and with a median diffusion reading slightly below fifty at 49.8 in April.

Goods and services sectors continue to perform in different fashion; the goods sector, the internationally traded sector, continues to be under more pressure. Of course, inflation statistics have improved but if the U.S. is setting the lead for inflation performance, that performance has stalled and there's evidence of inflation progress slowing in other places. This will be something that we will want to watch because it will bear importantly on how central banks perform and what they do in the future.