Economy in Brief

It has been a weak month for the S&P PMI readings. S&P previously reported manufacturing’s slide lower and with the services PMIs now engaged in a general topping formation and easing this month the composite PMI is continuing to slide and currently is embraced in a downtrend.

September assessments The sample of 25 countries that report PMI data show 13 of these reporters with composite PMI values below 50 that indicates an economic contraction since the composite is a comprehensive score.

76% of the reporters in September showed a slowing month-to-month; that is a decline in the PMI value compared to the month before. This compares to 20% slowing in August which had been a month of some improvement; however, August compared to July when 60% of the reporters had weakened month-to-month. And so, the data see-saw goes.

The unweighted average of the PMI readings among the 25 reporters in September is down to 51.5 from 52.4 in August; the 51.5 average is below the 51.7 average for July. The median reading for September slips more sharply to 49.8 from 52.5 in August whereas August had been an improvement from 51.3 in July. Of course, the September value at 49.8 is below the July value as well. While the average score in September shows a slight expansion at a PMI average of 51.5, the median shows there is a slight contraction in place at a median value of 49.8.

Sequential patterns The sequential readings are based on the average observations over three months, six months, and 12 months. Very little changes looking at either the average or the median metrics on these horizons. The average readings over these 3 periods have clustered around or just below the diffusion value of 52 while the median readings have clustered about a point lower around the median reading of 51; but both have been very consistent around these markers with no indication of anything that we could call a trend change. Over these periods, the number of reporters with diffusion below value of 50 which indicates contraction has been at six to seven members for 12-months, six-months and three-months. These sequential statistics also show that the proportion slowing over 12 months compared to 12 months ago is 56.5%, just slightly above half. Over six months, about 34.8% are slowing compared to their 12-month average, representing about 1/3 of the reporters. However, over the recent three months, the proportion slowing compared to six-month values is up closer to 2/3 of the reporters.

Standings The queue percentile standings which are presented in the final column give us the rankings of the level of the PMI readings since January 2020. The average ranking has been at its 43rd percentile while the median ranking has been at its 38th percentile. Both aggregate statistics, of course, are weak. Since we're looking at percentile standings, the median for any member in the group would occur at a 50-percentile standing. We can see that by a large margin the prototypical reporter is below its median, below the 50% standing mark. Only six members have rankings above their 50th percentile mark. Those are Egypt, with a 66-percentile standing, Japan, with a 71-percentile standing, Singapore, with an 80th percentile standing, Spain with an 80th percentile standing, and India & Brazil both with 84-percentile standings. Similarly, there are six members with percentile standings below the 25th percentile mark.

Conclusion: The clear conclusion from this is that the global economy remains weak and it's clear from the graphic above that we have weakness in manufacturing and in services although on the data back to 2021 quite clearly the manufacturing sector is relatively much weaker while the services sector has fared better despite its recent weakness. Still, both these sectors are undergoing downward pressure currently even though central banks engaged in easing patterns. Those easing patterns have been either put on hold or slowed given the reality of inflation that continues to run above targets that central banks have set.

Trends for the Better vs. Worse Worse- The grey backgrounds in the table identify countries where there has been persistent weakness over the designated periods with PMI reading below 50. For sequential data, there has been persistent contraction over three months, six months, and 12 months in Germany, France, Hong Kong, Zambia, Egypt, and Kenya. Over the most recent three-month period, there is persistent month-to-month contraction in each of these months in Germany, Hong Kong, Zambia, and Nigeria.

Better- Only Brazil and Egypt show progression of better readings over 12 months, six months, and three months; however, for Egypt the readings have remained below 50 indicating contraction. Conditions are persistently worsening for oil producers Saudi Arabia and United Arab Emirates, as well as in Zambia, Ghana, and Nigeria. That list is weighted to all producers and less developed economies and focuses attention on how the rest of the world is eager to see the money center economies continue their progression to cut rates to provide relief to these peripheral areas.

There is still a great deal of growth pessimism about prospects in Europe. The August unemployment data, however, make it unquestionably clear that the labor market continues to perform quite well. The unemployment rate in August for the European Monetary Union (EMU) stood at 6.4%, same as its level in July. The unemployment rate continues to sit at its historic low.

Still more unemployment progress that regress Scanning the unemployment rates for 12 of the longest standing European Monetary Union members as of August, unemployment rates month-to-month fell in six of them, while unemployment rates rose in only three of them. Labor market progress is still more widespread than labor market backtracking in the European Monetary Union. Unemployment rates in August fell in Finland, Italy, Spain, Ireland, Greece, and Portugal. Unemployment rates rose in August in Austria, Luxembourg, and the Netherlands. EMU-wide the number unemployed continues to fall.

We can also rank unemployment rates in their historic queue of data back to 1994. On this basis among the 12 monetary union members in the table, only two of them are above their historic medians. The medians in terms of ranked data occur at the 50th percentile mark. Luxembourg has an unemployment rate that ranks in its 85.5 percentile; Austria has an unemployment rate that ranks in its 60.5 percentile. All the rest of the country-level unemployment rates rank below their 50th percentile, with the highest ranking among the remaining countries being Finland where the unemployment rate stands at its 39th percentile, still well below its historic median. Germany, that has been in the news for unemployment slippage and economic weakening, has a 19.5% ranking in its unemployment rate – that is in the bottom 20-percentile of its historic queue of ranked data. The bottom line for the European Monetary Union is that the labor market is still quite solid and although there are concerns about weakness and perhaps concerns that the European Central Bank needs to cut interest rates more rapidly, the ECB is paying attention to inflation being over the top of its 2% target and at the same time it is looking at unemployment in the EMU that is tied for its all-time record low rate since the monetary union was formed.