Economy in Brief

Globally manufacturing PMI gauges improved in January with only two of the 18 individual reporting countries showing manufacturing worsening. Those two countries were Mexico and Russia. Over three-months compared to six-months, 72.2% of the reporters show the improvements; over six-months compared to 12-months, 55.6% of the reporters show improvements; comparing current values to 12 months ago, half of the reporters show improvements and half show deterioration.

Conditions are getting consistently better over three months, six months, and 12 months in the United States, Mexico, Brazil, Taiwan, and in South Korea. On the other hand, conditions are getting progressively worse over 12 months, six months, and three months in France, Canada, Japan, China, and Turkey.

The improving group features the United States and some of its important trading partners, particularly Mexico, Taiwan, South Korea, and Brazil. Among those worsening sequentially, are France- even though the euro area itself, and Germany the largest economy in the euro area, are not sequentially deteriorating. Canada shows sequential deterioration despite being importantly and closely linked to the U.S. economy through trade even with the U.S. doing sequentially better. Japan trades a great deal with the United States, too, although its largest trading partner is China which is on this list as one of the deteriorating countries and China is having some significant issues. It’s no wonder that these are dragging Japan down. Turkey, of course, is not a surprise on this list because of its ongoing monetary difficulties and structurally high inflation rate.

The queue rankings for the current PMI values back to 2020 now show 7 of 18 countries with PMI standings higher than their medians for this period (That means standings above the 50% mark). Those with standings above the 50% mark include India, Russia, Indonesia, Brazil, Mexico, South Korea, and Malaysia. There are five countries with queue standings below their 25th percentile in the bottom quartile of their range. Those include Japan, China, the U.K., Canada, and France. In this comparison, the euro area barely escapes being categorized as it stands just above its bottom quartile with its 26.5 percentile standing. In contrast, U.S. standing is in its 40.8 percentile.

Only 38% of the countries in the table show inflation accelerating in December. Inflation is much more broadly decelerating right now. In November, the accelerating/decelerating split was even.

Inflation has been moving lower, but its breadth across these 14 countries is above 50% showing more acceleration than deceleration, over three months and six months. The 3-month diffusion rate is 61.5%, the 6-month diffusion is a very high 92.3%. Still, year-on-yar inflation is decelerating on balance just about everywhere with a diffusion score of 7.7%. Inflation over 12 months accelerates compared to 12-months before that only in Luxembourg, hardly a regional bellwether.

Moreover, despite what the diffusion data tell us, over three months prices are falling by more where they are falling compared to the speed of increases where they are rising. The seven country-level prices that showed inflation increase over three months averaged gains of 5.9% compared to the seven categories with prices declining that show the average decline of 8.8%. The medians also show this with the median gain where there are price rises at 4.7% vs. the median decline of 5% where there are declines. These statistics juxtapose breadth vs. the intensity of a directional move.

Over six months not only is the tendency to accelerate broader (92% of respondents) but where prices are rising the average gain is 12.5% compared to an average decline of 9.3% where prices are falling. And when we shift to explore the median statistic where there are prices rising, the median price rise is 2.6% compared to the median drop being 2.1% where prices are dropping.

Year-on-year 13 of 14 PPI price indexes, are both decelerating compared to a year ago and falling compared to their year-on-year pace. So, inflation trends and tendencies are becoming more mixed, over shorter horizons. But in the aggregate, inflation rates are moving into a lower trajectory.