Economy in Brief

The S&P flash PMIs for the composite manufacturing and services sectors for the September readings show a stronger Germany, leading to a stronger reading in the European Monetary Union in the composite. Meanwhile, France, the United Kingdom, Japan, and the United States, all report weaker composite readings for September.

Composites are broadly weaker- Germany’s strengthening is in the composite as well as for manufacturing and services separately. This helps to push the services sector in the EMU to a stronger reading although the EMU manufacturing reading is weaker month-to-month. France shows weaker readings in the composite as well as for both manufacturing and services. Japan follows suit on that score. The U.S. and the U.K. each report a weaker composite driven by a weaker service sector that dominates a somewhat stronger manufacturing sector in both the U.S and in the U.K.

Only two composites show net expansion underway- Only the U.S. and Japan have composite PMI readings above 50 in September, indicating expansion. And the only sector readings with PMI values above 50 are for services in the U.S. and in Japan, as well.

Sequential trends- The sequential readings from 12-months to 6-months to 3-months show weakening for the composite and for both sectors in the EMU, in Germany, in France, in the United Kingdom, and in Japan. The exception is the U.S. that is stronger on balance over 3 months for the composite and for the services sector. Comparing the 6-month PMI averages to the 12-month averages, conditions are broadly stronger across sectors and the composites. The exception is France that weakens on all three metrics. The U.S. and Japan strengthen on all three metrics, while the U.K. Germany, and the EMU strengthen on their services measures which dominate the composite, making it stronger over 6 months compared to 12 months. Comparing the 12-month readings to 12-months ago, everything is weaker except for services and the composite in Japan.

Evaluation of PMI levels- The queue percentile standings rarely change much month-to-month and across these metrics we continue to see queue standings well below their neutral, 50% mark, generally below the 20% mark for most countries, across most sectors, with the sole exception being Japan that has the service sector reading at its 81st percentile; that helps the composite to a 75.5 percentile standing. However, despite month-to-month changes and broader trends in the sequential numbers, it's clear that the PMI values being posted are extremely weak.

Net 3-month changes- The final column of the table shows the net changes over 3 months; over three months these are overpoweringly weak. They're negative numbers for all the countries and all the sectors with the sole exception of manufacturing in the United States. The last 3 months have been weak.

On balance: The bottom line for the S&P flash numbers for September is that weak conditions continue to prevail and to dominate. There is some rebound in Germany that helps the European Monetary Union to post an uneven rebound, but the levels of activity indicated by the composite, the manufacturing sector and the services sector continue to be extremely weak.

Manufacturing and Services The INSEE surveys for France in September rose for manufacturing while it remained dead flat for services. The manufacturing survey rebounded to 98.6 in September but was still below its July value of 100.7. The manufacturing rebound in September is limited; activity remains weak, historically at a percentile standing of 31.3% in the bottom third of historic observations.

Manufacturing Climate and production- Manufacturing production expectations in September remained negative but improved to -6.2 from -9.0 in August. The recent production trend worsened, falling to -6.3 from -4.0 in August. However, respondents referring to their own industry reflected a ‘personal likely trend’ that's much stronger at 14.1 compared to 2.5 in August. Survey respondents are downbeat on manufacturing overall, but upbeat on their individual sectors. That's a divergence worth watching. And it's also a rather significant divergence because the standing for the recent industry trend is at its lower 15th percentile whereas the standing for the ‘personal likely trend’ is at its 77.7 percentile. There's an extreme chasm between what respondents think is going to happen to industry overall compared to their optimism on their own individual surveys. Is it optimism or denial? Those two readings on ‘likely trends’ compare to an overall manufacturing production expectation that has a 39.7 percentile standing. That standing is below its 50th percentile, below its median, and weak.

Orders and demand- Orders and demand are little-changed month-to-month in manufacturing. The September value is -21.4 compared to -21.2 in August. For foreign orders & demand, there is slight improvement to a reading of -13.9 in September from -15.1 in August. The percentile standing for overall orders & demand is a 32.8 percentile standing and that compares to a 44th percentile standing for foreign orders & demand; both are below median values, and both are weak.

Inventories- The response for inventory levels declined slightly in September to 14.8 from 17.8 in August, but these are strong values with 87-percentile standing for the September value.

Prices- Prices show increased pressure month-to-month with the ‘own likely price trend’ moving up to 5.2 in September from 2.2 in August compared to the manufacturing overall price trend that moves up to 8.9 from 5.0 in August. The ‘own likely price trend’ in September is still below its July value, whereas the manufacturing price level in September is assessed at twice its July level. The standing for the ‘own likely price trend’ is a 55.9 percentile standing, compared to a below-median 46.2 percentile standing for the manufacturing price level. While the assessment of manufacturing prices is below the assessment for the ‘own unlikely price trend’ the two standings aren't all that far apart.