Economy in Brief

The S&P Global PMI indexes once again showed mixed performance in July. Most large economies continue to do better, and the total PMI services sectors continue to make up for shortcomings in manufacturing.

Stability on a low growth path In July, 24% of the reporting countries showed activity was slowing; that's down from 48% in both June and May and indicates some progress. Only five of the reporting jurisdictions have PMI values below 50 indicating economic contraction in July; that July figure compares to five in June and seven in May. Declining activity continues to be an unusual event. Medians and average readings for the group of 25 countries or regions show extreme stability in the recent months as well as across sequential averages.

Growth moderately improves Comparing period averages from 12-months to six-months to three-months, unweighted readings of the U.S., the U.K., and European monetary union show extremely flat PMI values oscillating between values of 51.2 to 51.7 on those period averages; over three months, six months, and 12 months. The jurisdictions in the table show PMI readings below 50 are rare; once again declining activity is an unusual event. The proportion of reporters slowing over three months is 34.8% compared to 52.2% over six months and 30.4% over 12 months. Once again, we see these statistics tilted toward improving growth rather than towards slowing

Summing up The queue percentile standings for the group in July have an average value at 48.4% which is below the 50% mark that coincides with the median for the period. This tells us the growth is largely worse than what its median has been over the past 4 1/2 years. On a queue ranking basis, the largest economies consistently perform better with readings above the 50% mark for the U.S. and for the European Monetary System including each of its four largest EMU economies (Germany, France, Italy, and Spain). Japan has a queue standing in its 57th percentile. However, China’s percentile standing is in its 26th percentile and the U.K. is at its 40.5 percentile. Not all large economies are in the catbird seat, but most are faring well despite the moderate growth track globally.

This week, we examine the latest wave of trade developments across Asia as the US unveiled a full list of its modified reciprocal tariff rates, set to take effect on August 7. As anticipated, many of the updated rates are now lower than the original tariffs, with Cambodia and Vietnam seeing the sharpest reductions (chart 1). However, from peak tariff levels, China stands out—continuing to benefit from a 10% pause rate, down from triple-digit highs.

South Korea secured a deal just before the deadline, lowering its tariff from 25% to 15%. The new rate also applies to auto exports, offering relief to Korean automakers (chart 2). Thailand and Cambodia followed with US trade agreements after agreeing to an unconditional ceasefire following earlier military clashes. Their US-imposed tariffs dropped from 36% to 19%, highlighting how US trade policy can intersect with geopolitical interests and, in this case, may help reduce trade uncertainty (chart 3).

Malaysia, a key mediator in the ceasefire, also finalized a trade deal, reducing its tariff rate to 19% and gaining exemptions on key exports such as semiconductors (chart 4). Turning to Japan, while its US trade deal helped avert immediate tensions, the vague terms and a headline $550 billion investment—mostly in the form of loans—leave room for future friction (chart 5). China, however, remains a wildcard. Talks to extend its tariff pause are ongoing, but failure could see a return to extreme tariff levels (chart 6). Meanwhile, tech tensions linger, despite eased restrictions on Nvidia AI chip exports.

Latest US tariff developments We gained further clarity on the new reciprocal tariff rates announced by the US administration last week, as the White House released a full list of the modified rates on Thursday. It also announced that the new rates will take effect on August 7, giving partner countries a bit more time to negotiate new terms. Overall, as earlier indications suggested, Trump’s post-pause tariff rates—regardless of whether trade deals were secured—have often ended up lower than the original rates, as shown in chart 1. The largest reductions from original tariff levels have so far come from Cambodia and Vietnam. However, when looking at the steepest reductions from peak tariff rates, China stands out. It continues to benefit from a 10% tariff pause—down sharply from the triple-digit rates imposed at the height of US-China trade tensions earlier this year. On the flipside, a handful of economies—including New Zealand, the Philippines, and Brunei—are now facing modified tariff rates that are actually higher than their original Liberation Day levels. Notably, the Philippines ended up in this group despite having secured a trade deal with the US.

Manufacturing PMIs in the S&P framework were mixed in July. However, the median reading edged slightly higher rising to 48.6 in July from 48.5 in June. But both of these are significantly weaker than the 49.1 reading in May. Manufacturing continues to post PMI readings that are below 50 indicating sector contraction on a fairly broad basis in July among the 17 reporting countries in the table plus the euro area. Only India and Vietnam reported PMI readings above 50 indicating sector expansion in July. In June, three of these jurisdictions showed readings above 50; in May, only three had readings above 50 as well. It remains a difficult time for manufacturing globally.

The readings for the manufacturing PMIs also show slippage in the medians from 12-months to six-months to three-months. The 12-month median is 49.2, the six-month median at 48.8, and the three-month median at 48.7. The bottom line is that most manufacturing sectors show contraction, and the contractions are generally getting slightly worse.

However, on an individual basis over three months about two-thirds of the reporters showed an improvement. Over six months just under 40% showed improvement and over a year about 44% of them showed improvement compared to the year before. Only the three-month versus six-month comparison shows a majority of reporters indicating better performance in July.

The ranked or queue standings metrics that place these individual readings for July in their queue of data over the last 4 ½ years, show standings above 50% which put the individual readings above their medians for this period. And only six of these eighteen reporting jurisdictions sported readings above 50%. Those were for the euro area, Germany, France, and India. India has a rating well above 50% at its 96th percentile; Malaysia has a reading above 50% and Vietnam has a reading well above 50% at its 74th percentile.