Japan's Progress Is Confined to Manufacturing

PMI data are being finalized in step-wise fashion. The table below presents the most up-to-date PMI reading for all the entries in the table. Final PMI readings were issued today for the U.S. and Japan; the rest show the ‘flash' readings from Markit.

What's new:
The news in today's reports is that Japan's manufacturing sector is making continued progress, moving up from a diffusion reading of 51.4 in February to 52.7 in March. This rise boosts the standing of Japan's manufacturing PMI to a more solid 69.2 percentile standing. Japan still has the lowest ranking for a manufacturing PMI in the table apart from China. All the Western countries in the table have manufacturing PMI standings in their respective upper 90th percentiles. However, Japan is posting its strongest PMI reading in manufacturing since October 2018. In contrast, China's manufacturing PMI gauge is lower-ranking than Japan's, but China's manufacturing PMI was last higher as recently as December of last year.

While the virus started in China (with all due disrespect to WHO) and spread from Wuhan clobbering China's economy hard, China also mounted a very quick and sharp rebound. Yet, China and Asia are having a harder time making a more complete recovery as time has passed.

For now the West has it the best
Western countries namely the U.S., Italy, Spain, France, Germany and the whole of the EMU area have manufacturing sectors with standings in their high 90s range. Service sectors are more varied and in some cases not reported yet. The U.S. and the U.K. have very strong also high 90th percentile queue standings for services. Apart from the U.K. and U.S., services are weak in Europe; Japan is in the same sort of standing for services as European economies.

This time...it is different
Strength in manufacturing is a good sign and it is usually the leading sector. So once again it is pointing the way higher. But because of the virus there is a wedge thrust between goods and services unlike in the past. Many services businesses are running on reduced capacity or shuttered altogether in some cases. Right now some are undergoing a new round of restrictions because of another wave of coronavirus infections. Even the U.S. with a high proportion of vaccinations is seeing infections rates rise (at different speeds in different regions). The variants cause the spread to move faster sometimes even when a region is inhabited by a population with a lot of natural immunity or vaccination-acquired immunity.

The virus hokey-pokey
In Germany, virus infections are rising. In France, infections are rising; in Spain, infections are also rising. Italy's curve has been rising but has recently moderated slightly. The U.K. had beaten its rising curve down and it now faces a low and declining pace of infections- but it is still cautious because of the high incidence of the more infectious and potent variant there. Japan's infection rate is still moderate, but it is on a rising gradient. In the U.S., the number of infections has plateaued and is rising gently-so far. But U.S. health officials display a great deal of anxiety over the U.S. situation party after looking at Europe and asserting that the U.S. is a few weeks behind Europe in these various infection cycles. So far, the large states like New York, California, Texas and Florida show infection cycles that are low or that have plateaued or that demonstrate only a hint of acceleration. On the whole, U.S. health officials seem to be exercising an overabundance of caution.

Developing world is at risk
The new breakouts of the greatest concern are in the developing world right now especially India and Brazil, the countries that have been a troubled spot for some time. Health officials point out that despite progress in the richest countries, or alternatively, until or unless progress is made in the developing world, the virus will spread and will continue to develop variants until perhaps something that is very nasty and even harder to vaccinate against might develop.

We all are at risk
As long as the virus is circulating somewhere, the global economy remains at risk. The problem is that this virus is not just one thing. It is one thing for now but is able to mutate into something very different and to do it in a way that it might escape detection until after the new strain already gets well established and then becomes another force to be dealt with. We are truly ‘all in this together.' There is no point in holding or hoarding vaccine. Make and take it. But it is also clear that people are fed up with sheltering and isolation and yet another feature of the virus environment right now is that people have ‘cabin fever' and they want to get out and mingle and lead normal lives. And at the same time, many have lost a lot of their fear of a virus; yet, they still need to respect it. And that gives health experts a great deal of worry. Whether this is normalcy trying to assert itself too soon with ill effect we will know in time. For now we can only guess. And in the U.S. the divide on that issue is substantially along partisan lines. The nation remains divided. No one has brought it together or even tried. It's a sad and dangerous way to face a public health crisis.

Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.