Manufacturing PMIs Turn Up But Bifurcation Remains

The statistical variation among the values of the countries that have reported their manufacturing indices has widened again this month. The dispersion has been greater than it is in January only 6% of the time since 1991.

The most developed economies are making the clearest progress with a few exceptions. The euro area, Germany and France stand in the top 10% of their respective historic queues of values back to 1991. Taiwan has seen its manufacturing index stronger only 5% of the time. China and Russia are also high-ranking and have been better less than 5% of the time since 1991. For China though since it has been floundering on this timeline, this month's reading is a measure of improvement more than an indicator of strength. Japan has an 89th percentile standing. The U.K. has a 79th percentile standing. The U.S. has an 86th percentile standing (based on ISM manufacturing data).

Weakness is present in Mexico (4.3 percentile), Brazil (5.5 percentile), Turkey (11.0 percentile), India (12.3 percentile), and to a lesser extent in South Korea (32.9 percentile).

While the percentile standing of the U.S. manufacturing PMI is only moderately strong, its raw diffusion reading is one of the best and its 12-month change leads all countries in terms of its improvement. In terms of 12-month changes, Taiwan, Russia and Germany follow the U.S. lead.

In terms of weakness, Brazil, Turkey and Mexico have slipped the most in the last 12 months. Brazil and Turkey have had political problems while Mexico has been in the cross-hairs of the new Trump Administration in the U.S. and that has a desire to reform the NAFTA agreement and to stop U.S. firms from locating in Mexico at the cost of U.S. jobs. For Mexico, the outlook has deteriorated and the prospects are not good.

In the EMU, there are smiles all around as improvements and firm readings are widespread with few disappointments. Greek manufacturing took a step back and continues to show deterioration. The Dutch and Danish manufacturing indices backtracked but to still firm readings. Norway eased slightly along with Italy while manufacturing in Switzerland did skid to a four-month low. But on balance, the European story was a happy one. Euro area manufacturing has been better only 7% of the time since 1991. And manufacturing is on some sort of upswing. The rising tide is not lifting all boats, but it is lifting a lot of them.