More Global PMIs Flashing Recession(Depression) Warnings
by Jeffrey P. Snider
DavidStockmansContraCorner.com
May 24, 2016
While Markit’s economic sentiment surveys had been perhaps a touch more optimistic about the state of the world than others or other data, May has been a rough month for that comparison. Again, it’s not the absolute number calculated for each survey but rather the relative direction and, in these cases, the uniformity of that direction or pattern.
Japan:
PMI data point to Japan’s all-important manufacturing economy suffering its steepest downturn since late 2012. The Nikkei Flash Japan Manufacturing PMI fell from 48.2 in April to 47.6 in May, its lowest since December 2012.
However, the survey’s sub-indices tell a more detailed story, in which exports are slumping at the fastest rate since early-2013 as yen strength hits competitiveness. The strong currency is also keeping inflationary pressures down, with input costs continuing to fall at one of the steepest rates seen since the height of the global financial crisis. Further falls in survey indices of new orders, backlogs of work and purchases of inputs all point to the downturn persisting, and possibly accelerating further, in June.
The survey data therefore raise worries that the surprise upturn in Japan’s economy in the first quarter, when GDP rose 0.4%, may prove frustratingly short-lived.
It wouldn’t actually be surprising at all if Japan’s Q1 GDP was not a significant indication of true economic direction.
Europe:
A disappointing flash eurozone PMI for May adds further to the suggestion that the robust pace of economic growth seen in the first quarter will prove temporary.
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