Global PMI kicks off September
September kicked off with the release of global manufacturing figures the first of the month. As global growth continues to moderate, the state of the manufacturing sector should be of critical concern to all capital markets players. Manufacturing was the first sector to lead the recovery in the spring of 2009.
I would characterize the global manufacturing figures released within the past 12 hours as weak but consistent with the growth slowdown. There are not any significant contractions within these numbers to caution further weakness in global growth or to return instability to the global equity markets that found support in the past week (Fig 1.4). As many global PMI’s flirt with contraction, understand that mild contraction is consistent with the current growth slowdown. More problematic would be deeper contractions, which would suggest further downside risks to global growth.
In fact, I would say that the modest rise in China PMI and the U.S. ISM Manufacturing reading, which remains above the contraction/expansion 50 level, suggests the global equities markets priced in far worse manufacturing conditions than the evidence suggests. The surprise is to the upside.
- China PMI rose to 50.9 from last month’s 50.7 (Fig 1.1).
- U.S. ISM Manufacturing fell to 50.6 from last month’s 50.9 (Fig 1.2).
- German PMI fell to 50.9 from last month’s 52.0 (Fig 1.3).
- French PMI fell to 49.1 from last month’s 49.3.
- Italian PMI fell to 47.0 from last month’s 50.1.
- U.K. PMI fell to 49.0 from last month’s 49.4.
- South Korea PMI fell to 49.7 from last month’s 51.3.
Fig 1.2 U.S. ISM Manufacturing, 9/30/07-8/31/11
Fig 1.3 GERMAN PMI, 4/30/07-8/31/11
Fig 1.4 S&P 500 Index (SPX), 7/1/11-9/1/11