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Economy in Brief

PMI Surveys Hint at Slower Growth in Several Countries
by Carol Stone November 1, 2006

Purchasing Managers surveys for a number of large countries indicate a modest slowing of manufacturing growth through October. Changes from September are not big, but most are in the same direction and the overall indexes are reinforced by moves in the key new orders component.

In China, the total index is down 0.3 point, and at 52.15, indicates growth is still spread across a good portion of reporting companies, although it is not broadening. New orders remain firm, although down fractionally from September. More notable is a slowing of outstanding orders -- backlogs -- to 49.78, just below the 50% threshold of expansion. In light of continuing growth in new orders, the decline in backlogs may only reflect strengthening productivity, but even so, it does appear that overall momentum is waning.

Russia's manufacturing sector actually appears stronger, although the latest months have diminished more than in China. Overall activity, according to the Purchasing Manager measure, had a reading last month of 53.05, down 1.65 points from September. New orders, which run consistently higher than the composite index, slipped 2.5 points to 56.82. In August both of these reached their highest levels since 1999. So the easing in September and October may only be a correction. Backlogs in Russian factories have actually strengthened since early 2005 along with the good gains in new orders. But they too corrected in October back below 50%.

The Indian economy's service sector has received more publicity in recent years, but its manufacturing industries are experiencing broad expansion as well. The overall PMI was 59.30 in October, up from September's 59.00 reading. These data are very new, beginning only in April of last year. But certainly their behavior is internally consistent. Strong new orders, evident in the graph, are pulling up backlogs, which rose 0.63 point in October to 52.68, their highest level. So momentum in Indian manufacturing looks quite vigorous.

In the long-established UK manufacturing sector, the overall index eased 0.78 point to a still firm level of 53.73, as industry there continues a year of good expansion. However, what we see in the last graph is that output is gaining as fast as new orders, so that backlogs look weak. This suggests that while overall growth is good now, it is vulnerable to any orders slowdown going forward.

PMI Indexes, SA Oct 2006 Sept 2006
China 52.15 52.45
  New Orders 53.02 53.39
  Backlogs 49.78 50.56
Russia 53.05 54.70
  New Orders 56.82 59.34
India 59.30 59.00
  New Orders 66.29 65.17
UK 53.73 54.51
  New Orders 54.72 55.00
Memo: US 51.2 52.9
  New Orders 52.1 54.2
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