Industry is generally seen as a source of employment on a large-scale. This is often, at least implicitly, the reason to highlight the need for an industrial policy. It does not work like that now. Manufacturing activity grows but creates very few jobs. New technologies have taken over the production system, highlighting trends already evident for many years.
The American example illustrates this phenomenon. The rebound in industrial activity has been strong without creating a lot of jobs. It is this dynamic that must be now understood when we look at the manufacturing sector. Europe will not escape this. Continue reading
If we want to have a representation of the new Euro Area dynamics the chart below is the good one.
It represents the synthetic indices of the PMI/Markit surveys in August. Each index is a weighted average of the manufacturing index and of the non manufacturing index. All converge to 50 or above. The main point is the contrast between the dispersion in a recent past to the current common trend. Continue reading
The trend is changing in the Euro Area. After a long period of uncertainty and recession, we see a reversal in the manufacturing sector.
1 – Looking at the PMI/Markit surveys there is now a common dynamic. All the synthetic indices now follow the same trend. In a recent past those indices’ profile was very different one from each other. This is no longer the case as it can be seen on chart 1.
Southern countries as Spain and Italy present a robust profile well above the threshold of 50. France is a little below the common trend. One probable reason can be seen on Chart 3 where France New Export Orders index is decreasing when all the others are up. May be a question of competitiveness? Continue reading
PMI Surveys in Asia were heterogeneous in August as it can be seen on Chart 1
In China there was a little improvement. The two PMI indices were up but still very close to 50 that shows stability in economic activity. The official index, which represents large public companies, was at 51 in August versus 50.3 in July. The private sector index was just at 50.1 after 47.7 in July.
These numbers reduce the downside risk that was perceived last spring. We know that GDP growth will probably remain in the range 7-8% for the years to come due to the rebalancing of the growth process. Last spring after the central bank intervention there was a risk a stronger control on the credit and on the shadow banking sector. This would have created a specific risk on credit distribution and on growth. Some economists thought that growth number could fall below 4%.
In July, for the second month in a row, the number of unemployed has decreased in the Euro Area. We can see this change of the first chart below. This number was up every month during 25 months from May 2011 to May 2013. This is a real change. It’s a signal that the business cycle profile is changing. Companies’ firing behavior has changed. That’s what is important as it is the translation on the labor market that their expectations have changed. Continue reading