Economy in Brief

Composite PMI data for July show a slight worsening compared to June across most of the 24 countries and areas reporting composite PMI data. Among the 24 countries and areas that supply early data on this measure, only 8 show improvement month-to-month in July that's after seven showed improvements in June.

The unweighted average for the sample shows a slight cooling to 51.6 in July from 51.9 in June continuing the slowdown from 52.9 in May. However, median statistics provide a slightly different picture, with the median reading in July strengthening the 51.2 from 50.8 in June compared to a median value of 52.3 in May. On both average and median metrics, there is a weakening from May to July that averages a downgrade of about one diffusion point.

Sequential data showing performance over 12 months, six months, and three months indicate little change across reporters for the average metric. The 12-month average is at 51.5, the six-month average moves up to 52.2 and the three-month average moves down to 52.1. Median data over 12 months show a reading at 51.3 moving up to 51.8 over six months and then moving back down to 51.3 over three months. Conditions are relatively static at readings just slightly above the breakeven diffusion value of 50.

In July, there are 7 reporters with PMI values below 50, indicating overall economic contraction. That compares to 8 in June and 4 in May. Sequential data show 8 jurisdictions below 50 over 12 months, 6 below 50 over six months and 5 below 50 over three months.

Tendencies to decelerate have fluctuated, with 40% showing deceleration month-to-month in May compared to 72% in June and 56% in July. Looking at the averages from 12-months to six-months to three-months, 52.2% of reporters show slowing over 12 months compared to 12-months ago, 30.4% show slowing over six months compared to 12-months, and 56.5% show slowing over three months compared to six-months. There is no trend here and there's little evidence of any significant strength. But there is growth.

The queue percentile standing data stand on average at 41.2% with a median at 38.1%; these are roughly similar figures showing that the average or median representative country is below its mean/median by about 10 percentile-standing points. Eighteen of these 24 jurisdictions have percentile standings below their 50th percentile, while only 6 have standings above their fiftieth percentiles. However, in terms of diffusion standings, only seven jurisdictions have readings that are below the diffusion value a 50 which indicates not just underperformance but economic contraction.

The money supply picture in June is beginning to turn with growth on the rise. In the European Monetary Union, M2 growth progresses from a 1.3% pace over 12 months to 2.1% over six months and accelerates to a 4.3% annual rate over three months. The rate of growth in private credit in the Monetary Union is 0.8% over 12 months, moves up to 0.9% over six months, and to 1.6% over three months.

Real money growth: EMU- Indexing these variables for inflation to look at rates of growth in real money balances in the European Monetary Union, shows a decline of one-half of one percent over 12 months, a decline at a 0.3% annual rate over six months and an increase at a 0.7% annual rate over three months. Monetary growth has completed the progression from being in a contractionary mode to being expansionary in real terms. Real private credit has not yet made that turn. The growth in credit over 12 months is -1.7%. That contraction is reduced to a pace of -1.5% over six months, but then, over three months private credit growth contracts 2% at an annual rate. On balance, real private credit growth continues to be restrictive.

Other monetary centers- Turning to the other major monetary center countries, we see positive nominal money growth in U.S. M2 and U.K. M4 over three months, six months, and 12 months. Japan moves in the opposite direction with growth rates of money slowing down and showing contraction over three months. Japan has been on the opposite cycle for some time. Japan just this week executed a rate hike as all the rest of the money center central banks have begun or are anticipating interest rate cutting. The ECB began cutting rates a while ago. The Bank of England cut its key policy rate just this week while the Federal Reserve had a meeting this week and decided not to cut rates although it began to point to September. In the wake of some surprising data, especially the U.S. employment report for July, U.S. markets have gone a little nutty, and they're starting to price in not just a rate cut but a large rate cut and several of them. The U.S. case marks a strong change in market pricing. I would caution what markets are doing on the heels of this employment report since the employment report clearly showed that there were flaws. A large increase in the number of workers who were not able to work because of weather conditions and yet markets have completely ignored this and treated all of the weakness in that report as though it's authentic weakness. It's not clear that that's the case, but for now markets are on that bandwagon- keep an eye on U.S. data.

The growth rate in U.S. real money balances shows that, without the Federal Reserve changing policy, money growth has become stimulative. Over 12 months the U.S. monetary aggregate M2 declines by 1.9%, over six months it declines at a 0.2% annual rate, and over three months it increases at a 2.6% annual rate. U.K. 12-month money growth in M4 declines by 1.9%, then it increases at a 0.8% pace over six months and at a 0.7% pace over three months. In Japan, with a tightening kicked off, the 12-month growth rate for M2 plus CDs is -1.3%. That stays pretty level at -1.4% at an annual rate over six months, but over three months that tightens considerably to a decline rate of -4.9% at an annual rate. Japan is barely touching the brakes on interest rates while money supply is showing some significant weakness. Since late-2022, Japan's M2 growth has been consistently showing declines; about a year ago, Japan began to show some slight increases. However, declines are back and now they're starting to progress to even weaker numbers. Japan’s situation is still in flux as its headline inflation rate has been moving up, but its core inflation rate has remained relatively stable and to right around its target rate.