Further Encouraging Data
Chart of the Week 05 Aug, 2010
Earlier this week the U.S. Institute of Supply Management released its monthly reports – one for the manufacturing sector (which correlates well with industrial demand and hence commodity demand) and the other from the non-manufacturing sector (which provides an insight into the health of the service industries and employment in general). Both reports provided better than anticipated outcomes and have been a catalyst for optimism on global equity markets.
A key measure for the manufacturing sector is the monthly Purchasing Managers Index (PMI) which is part of a global data series. The July data has been encouraging, indicating robust growth in manufacturing activity in most parts of the world – and ahead of expectations which anticipated a significant slowing of growth in the U.S.
The PMI trends from key economic zones are outlined below:
Source: ISM, Markit, SR
| Headline PMI by Area |
US | Eurozone | Japan | China |
|---|---|---|---|---|
| Jan-08 | 50.7 | 52.8 | 52.3 | 53.2 |
| Feb-08 | 48.3 | 52.3 | 50.8 | 52.8 |
| Mar-08 | 48.6 | 52.0 | 49.5 | 54.4 |
| Apr-08 | 48.6 | 50.7 | 48.6 | 55.4 |
| May-08 | 49.6 | 50.6 | 47.7 | 54.7 |
| Jun-08 | 50.2 | 49.2 | 46.5 | 53.3 |
| Jul-08 | 49.5 | 47.4 | 47.0 | 53.3 |
| Aug-08 | 49.3 | 47.6 | 46.9 | 49.2 |
| Sep-08 | 43.4 | 45.0 | 44.3 | 47.7 |
| Oct-08 | 38.7 | 41.1 | 42.2 | 45.2 |
| Nov-08 | 36.6 | 35.6 | 36.7 | 38.8 |
| Dec-08 | 32.9 | 33.9 | 30.8 | 41.2 |
| Jan-09 | 35.6 | 34.4 | 29.6 | 45.3 |
| Feb-09 | 35.8 | 33.5 | 31.6 | 49.0 |
| Mar-09 | 36.3 | 33.9 | 33.8 | 52.4 |
| Apr-09 | 40.1 | 36.8 | 41.4 | 53.5 |
| May-09 | 42.8 | 40.7 | 46.6 | 53.1 |
| Jun-09 | 44.8 | 42.6 | 48.2 | 53.2 |
| Jul-09 | 48.9 | 46.2 | 50.4 | 53.3 |
| Aug-09 | 52.9 | 48.2 | 53.6 | 54.0 |
| Sep-09 | 52.6 | 49.3 | 54.5 | 54.3 |
| Oct-09 | 55.7 | 50.7 | 54.3 | 55.2 |
| Nov-09 | 53.6 | 51.2 | 52.3 | 55.2 |
| Dec-09 | 54.9 | 51.6 | 53.8 | 56.6 |
| Jan-10 | 58.4 | 52.4 | 52.5 | 55.8 |
| Feb-10 | 56.8 | 54.2 | 52.5 | 52.0 |
| Mar-10 | 59.6 | 56.6 | 52.4 | 55.1 |
| Apr-10 | 60.4 | 57.6 | 53.5 | 55.7 |
| May-10 | 59.7 | 55.8 | 54.7 | 53.9 |
| Jun-10 | 56.2 | 55.6 | 53.9 | 52.1 |
| Jul-10 | 55.5 | 56.7 | 52.8 | 51.2 |
Source: ISM, Markit, SR
Note: a reading above 50 indicates manufacturing sector growth and below 50 represents contraction.
The data from Europe is particularly strong, with Germany leading the way – consistent with recent business confidence data. U.S. data was also higher than expected given the widespread fears over the fragility of its economic recovery. Similarly, the slower growth in China is at a level that suggests activity is actually holding up relatively well compared to past tightening periods.
Similarly, the non-manufacturing data provided encouragement, with yesterday’s release from the ISM noting:
“The NMI (Non-Manufacturing Index) registered 54.3 percent in July, 0.5 percentage point higher than the 53.8 percent registered in June, indicating continued growth in the non-manufacturing sector at a slightly faster rate. The Non-Manufacturing Business Activity Index decreased 0.7 percentage point to 57.4 percent, reflecting growth for the eighth consecutive month. The New Orders Index increased 2.3 percentage points to 56.7 percent, and the Employment Index increased 1.2 percentage points to 50.9 percent, reflecting growth after one month of contraction. The Prices Index decreased 1.1 percentage points to 52.7 percent in July, indicating that prices are still increasing but at a slower rate than in June. According to the NMI, 13 non-manufacturing industries reported growth in July. Respondents’ comments are mixed. They vary by industry and company, with a tilt toward cautious optimism about business conditions.”
