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Wednesday, October 3, 2012

JPM global PMI

It has been a rough few months for the global PMI data.  Here is the latest chart.


The other two times the PMI got this low the U.S. was in a recession.  The global economy has continued to deteriorate over the summer.

Here is a look at the latest components.

Input prices are rising while new orders and output are still contracting.  That is not a very good combination for profits.  The employment ticked up a bit which is good.  We will just have to wait and see if that continues with production falling.

Here are some interesting comments from the report.

Production and new orders each declined for the fourth
successive month in September, although rates of
contraction eased for both variables. New export orders also
fell and for the fifth straight month. The outlook for production
in the coming months also remained muted.
Although the
cyclically-sensitive new orders to inventory ratio ticked
higher, it stayed at a broadly neutral level.
September saw manufacturing production decline in the US,
the European Union and Asia. The rate of contraction in the
US was only slight and weaker than in August. The pace of
decline also eased in the Eurozone (five-month low). Within
the euro area, production fell in all of the big-four nations,
Austria and Greece.

The China Manufacturing PMI Output Index fell to a six month
low, while Japanese production fell for the fourth
straight month. The downturn in Taiwan deepened, while
output stagnated in Vietnam.

The continued decline in export orders is going to be a drag on global growth.  That might be part of why the outlook for production in the future was muted.  The Eurozone may have seen the pace of decline moderate a bit, but will that last?

Here is a chart of various Eurozone PMIs together.

The are some sizable upticks in some of the countries.  There were similar upticks late last year.  Will this bounce continue or roll over like those did?  Upticks in new orders will be needed to maintain the upticks in the PMIs.  We will have to wait until next month to see if they tick up then.

The global economy is still sucking wind.  Energy and food prices are staying high.  I think it is going to be hard for the economy to pick up much steam.  New orders will be the key to any meaningful uptick.  So far we are not seeing anything good there.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.