S&P Global Flash PMIs Weaken -Except for Japan

The S&P Global PMI indexes weakened across the board in June; the exception to the weakening was only in Japan where services have improved month-to-month and where the composite also improved month-to-month. The U.K., France, Germany, the U.S., and the European Monetary Union each saw weaker services, manufacturing, and composite readings. This is a sharp worsening from May when the composite index weakened in the U.S., and in the U.K. with the U.K. seeing weakness in manufacturing and services. The U.S. composite index weakened on the month due to service sector slowing. Germany also was weaker in May on a weaker manufacturing sector that dragged the composite lower. The EMU registered a weaker manufacturing sector and its composite index rose in May along with that sector in France and Japan.

Over three months composites increased in the EMU, Germany, France, and the U.K., with Japan and the U.S. showing weaker composites as well as weakness in both manufacturing and services sectors. Over three months the U.K. saw a weaker manufacturing sector as did Germany and the EMU alongside an improvement and their overall composite index. However over six months all countries in all sectors show all sector weakness -except for Japan that shows contrary three sector improvement. All countries show strength over 12 months in all sectors with no exceptions.

The queue percentile standings show an average composite for this group of countries that is below 50, manufacturing gauges that are below 50, by a substantial margin and a service sector average that is below a 50-percentile standing as well. All sectors are below their respective historic medians (below 50) on this timeline. However, including the U.S. in this run of data makes things look worse. After leading the way higher post Covid, the U.S. is now leading the way lower with S&P PMI flash values at standings below their respective 30th percentiles. In sharp contrast, Japan is sporting queue percentile ratings in the 90th percentile for services and for the composite- but a manufacturing reading only at its 66th percentile.

The German service sector and the U.S. service sector as well as the U.S. composite are below their respective levels compared to where they stood in January 2020 before Covid struck.

Month-to-month, of 18 sector and composite readings, only three rose. The composite fell month-to-month on average by 1.8 points led by a 2.5-point drop in manufacturing and a 1.7-point drop in services.

Evidence of economic slowing is spreading and this month the signals are led by readings in the U.S. Over three months the U.S. composite is down by 6.5 points exceeded only by the 6.6-point drop in the U.K. with a 3.4-point drop in both Germany and France and a drop of 2.7 points in the EMU. Japan improves by 2.9 points over three months. The U.S. has the largest composite drop over 12 months, a decline of 12.4 points with the U.K. drop of 8.7 points the next worse. The U.S. has a 9.7-point drop in its manufacturing reading over 12 months, but the U.K., Germany, and EMU have larger 12-month drops than that. The U.S. service sector backtracking over 12 months of 13 points compares to an average for the group of -4.9.

Weakness is in train. Central banks are hiking rates as inflation rages. War burns in Ukraine as Russia is now having its way in a more concentrated conflict. Political pressures are welling up as no one likes rate increase, but everyone also hates inflation, and no one wants to pay the price of recession to stop it. But then again, you can’t always get what you want…can you?