PAUSE: Global PMI’s have been rising for three months and are above breakeven 50 level for the only the first time in seven months. China and services have led, but the rebound has been broad-based by country and industry. Brazil has been a unique outlier. This is indicative of lower near-term global recession risks, with the world economy growing around 2.5%, and a less-bad earnings outlook. But underlying PMI data also tells other stories, of stickier prices and a jobs market. This would force the Fed to cool this rebound. But financial system contagions are now doing this financial tightening for them. The next flash PMI comes in a week, just after FOMC.
TRENDS: We illustrate this with the US PMI, produced by the Institute for Supply Management (ISM). A US trade association producing a widely followed local PMI since 1948. Supply chain problems have normalized. With inflation problems shifting to employment and wages. This is cooling but is still high. Whilst ‘prices paid’ are only slowly easing. This is increasingly sticky as companies turn more bullish and jobs demand firms. New orders have turned up, boosting the growth outlook. This was a tension with a Fed ‘near-peak’ outlook until recent bank contagion.
PMI: The global purchasing managers index (PMI) is a monthly forward looking diffusion index. It tracks 45 countries, with 30,000 companies being surveyed, and is estimated to cover 90% of global GDP. It is seasonally adjusted, with results weighted by firm size, and is managed by the S&P Global. A reading above 50 indicates expansion, and below 50 a contraction. It is most commonly used to track the GDP growth outlook, but also includes plenty of important insights into new orders, industrial production, trade, supply chains, jobs, and inflation (see below).
All data, figures & charts are valid as of 16/03/2023