Daily Column – Economic Momentum in November

The global economic outlook was still much contrasted in the manufacturing sector at the end of November. That’s the result of PMI/Markit and ISM surveys.

The first point to mention is the marginal drop of the PMI world index from 52.2 in October to 51.8. (An index above 50 means an improvement of the activity in the manufacturing sector. Going from 52.2 to 51.8 means that activity is still growing in the manufacturing sector but at a slower pace)

The downward inflection of the global index is linked to a US PMI index that is weaker than last summer according to the Markit survey. This is in contrast with the ISM survey that shows that since last summer the manufacturing sector is booming. The divergence can be seen on the chart.
Nevertheless whatever the survey, the US economy is still pulling up the global economy. The divergence between the two surveys can be perceived as a risk on the US economy. It doesn’t say that the economy is trending downward but that it is probably losing steam as can be seen in the industrial production index. In October the 3 month change of the Manufacturing Production Index was up by 2%. It was 7.2% in June.

The American economy has still the leadership on the world economy. Other countries’ contributions are weaker.
In the United Kingdom the index appears more robust than at the end of last summer but it is well below its spring level. In Japan, the index is positive at 52 but without a strong acceleration.

In the Euro Area the index dropped at 50.1 from 50.6 in October. The activity in the manufacturing sector stalled in November. Short term prospects are not optimist. The New Orders index was lower in November at 48.7 versus 49.5. The ratio of New Orders to Inventories remains below 1 at 0.99. The Industrial Production Index will not rebound immediately.
In France the index was stable at 48.4 versus 48.5 in October. The activity is still contracting rapidly
In Germany, the manufacturing sector is contracting at 49.5 versus 51.4 in October. The New Orders index dropped dramatically at 47.1. Short term economic prospects are weak in Germany
In Italy the index was stable at 49 but still in the negative territory
Spain is the only large country of the Euro Area to grow rapidly. Its index was up at 54.7 versus 52.6 in October.

In emerging countries the BRIC index is marginally higher at 50.7. The weaker China (50) is compensated by stronger indices in India and in Russia.

The global economy is still weak according to these surveys in the manufacturing sector. It is just pulling up by the USA.

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