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Economy in Brief

Manufacturing PMIs Glow Hotter
by Robert Brusca  April 1, 2021

Over 78% of the manufacturing PMIs in the table below show improvement in March compared to February. That's an extremely high proportion. On the timeline since January 2017, there is a good deal of improvement in train. Nine of the sixteen country- or regional- PMI gauges listed in the top of table (see Table below) have queue percentile standings (QPS) above their 96th percentile on that span. There are eight that are on their highest levels for this period. The global manufacturing scene is transitioning from being pummeled by the virus to being stretched to its maximum in about one-years' time.

China is a laggard, not a leader!
Interestingly, only one country has a manufacturing PMI standing below its median (below a 50% QPS) that is China. China's raw diffusion score actually fell month-to-month and stands at 50.6 in March, barely showing growth. China's manufacturing PMI has withered for four months in a row. It is logging the weakest reading since April 2020. China also is the only country or area in the table to see its PMI index lower in March 2021 than it was in January 2020.

Recent progression to strength
Only China, Russia and Brazil have PMIs month-to-month lower in March. Five of the entries have weakened month-to-month in February. Nine have weakened month-to-month in January. There has been a progression to strengthen on a number of different fronts.

...and the U.S. fiscal push is yet to come
While the QPS metrics are very impressive, they only apply to a short four-plus-year period. They still are interesting, but their signals are not decisive. The strength is a relative recent occurrence and while in the U.S. there is a powerful push from fiscal stimulus that push is YET TO COME(!), Europe has been struggling with a slow vaccine rollout and some countries are still imposing lockdowns, France and Italy ae examples.

Smoothed and unsmoothed averages show progress in train
The 12-month average of the PMIs is still weaker than the 12-month averages of 12-months ago for six of the sixteen entries in the table. On a 12-month average basis, seven still are below the level of 50. But over six months all entries are stronger than their 12-month averages and only two have readings less than 50. Over three months three averages are weaker than over six months, but only one entry (Malaysia) averages below 50 over that three-month period.

If we step away from comparing period averages, the diffusion (% improving) line in the table shows the percentage of entries improving over spans of 12-months, six-months and three-months as well as month-to-month for the last three months. These data show widespread gains and a high proportion of entries that demonstrate improvement except for January.

The west is the source of strength
The G-7 plus EMU countries have current standing in their 91.9 percentile. The whole group in the table (not double counting France and Germany) averages a 79% QPS. Asia alone averages 71.5%. Clearly the strength is in the West and Asia has been lagging despite some obvious strength there such as Indonesia, South Korea and Taiwan.

Has its political conflict held back Asia?
Asia has been rife with political conflict and China has broken its promises on Hong Kong and begun to change the rules in Hong Kong to affect its full absorption into China. Myanmar has a bloody coup in train where the military has been killing protestors and recently killed over forty children. Thailand has had demonstrations against the King. China's South China Sea incursions also have prompted some border issues. India and China have had their own ongoing border problems that have risen to the level of physical conflict in the last year. China continues to try to brow-beat Taiwan over its right to absorb it and the U.S. has been moving carefully but more boldly to back Taiwan. North Korea has been testing missiles in the region as well violating a past agreement with the U.S. on ballistic missile tests. All of this political discord seems to have robbed Asia of some of its economic vitality.

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