Manufacturing PMIs Battle Back

Manufacturing sector PMIs battle back strongly in June with all countries reporting a value showing a gain in June over May. The average PMI value rose to 47.5 in June from 39.7 in May and that compared to 35.3 in April for most countries (Japan, Taiwan and Vietnam excluded). April was the low. And while there is a bit more variation in the ranking of this month's PMI standings, the average ranking at the 28.4 percentile is still a low one.

A number of countries post relatively high rankings in June; among these is Malaysia at 92.3%, Turkey at 88.5% and China at 78.8%. Of the 16 countries and regions in the table, seven of them have PMI values above 50. But those with high queue standings have high readings more because of a poor history than because of such high PMI readings in June. For example, Malaysia's high queue standing couples with a PMI value of 51, Turkey's couples with a PMI value of 53.9, China couples with a PMI value of 51.2.

There are seven countries with manufacturing expanding and that is something. It is a very fast revival from the very weakest readings of April for most and May for some. The progression of the moving averages, from 12-months to six-months to three-months, continues to show a slowing in progress. That is because the turn up is still slow and the three-month average still contains the low-water marks for all countries.

The virus continues to be a factor spreading and setting back hopes for a fuller and ongoing reopening of economies. But many countries are showing relapses of sorts for a variety of reasons.

While doctors seem to have learned a lot about treating the virus and deaths have slowed, the virus does continue to spread and health official continue to be worried about that. Outside of Sweden, there is no place that seems to have embraced the concept of acquiring herd immunity. But most national strategies to protect those most vulnerable to the virus have failed. In the U.S., 40% of the covid-19 deaths have been in nursing homes. That's hardly the stuff of a potent virus.

Evidence still points to ongoing economic recovery as retail sales in Germany rebounded, rising 13.9% month-on-month. In Japan, consumer confidence is rising but remains at still very weak levels. In Chile, the spread of Covid-19 is gaining and economic activity fell by 15.3% in May from the same month of one year ago. The Southern hemisphere is battling a growing outbreak.

Geopolitical tensions continue to provide an uneasy back drop. China made its first arrests, 300 of them, in Hong Kong under the new laws adopted yesterday. In the U.S., anger is mounting over allegations that Russia paid bounties to the Taliban for killing U.S. soldiers and if this charge can be proven many want new sanctions on Russia. President Donald Trump in the U.S. is looking increasingly isolated as a large bloc of former Republican George W. Bush administration officials is reported to be ready to announce their support for Democrat Joe Biden.

On the trade front, the new U.S.-Canada-Mexico trade treaty, USMCA, takes effect today. The Baltic freight index has just reported out its 24th straight gain. That is good news. But the index has been rising after a period of weakness so its signal though going in the right direction consistently it is still not a strong one. But it is a hopeful trend that also is underpinned by todays improving PMI framework.