Globally MFG PMIs Recover

Globally manufacturing PMI gauges improved in January with only two of the 18 individual reporting countries showing manufacturing worsening. Those two countries were Mexico and Russia. Over three-months compared to six-months, 72.2% of the reporters show the improvements; over six-months compared to 12-months, 55.6% of the reporters show improvements; comparing current values to 12 months ago, half of the reporters show improvements and half show deterioration.

Conditions are getting consistently better over three months, six months, and 12 months in the United States, Mexico, Brazil, Taiwan, and in South Korea. On the other hand, conditions are getting progressively worse over 12 months, six months, and three months in France, Canada, Japan, China, and Turkey.

The improving group features the United States and some of its important trading partners, particularly Mexico, Taiwan, South Korea, and Brazil. Among those worsening sequentially, are France- even though the euro area itself, and Germany the largest economy in the euro area, are not sequentially deteriorating. Canada shows sequential deterioration despite being importantly and closely linked to the U.S. economy through trade even with the U.S. doing sequentially better. Japan trades a great deal with the United States, too, although its largest trading partner is China which is on this list as one of the deteriorating countries and China is having some significant issues. It’s no wonder that these are dragging Japan down. Turkey, of course, is not a surprise on this list because of its ongoing monetary difficulties and structurally high inflation rate.

The queue rankings for the current PMI values back to 2020 now show 7 of 18 countries with PMI standings higher than their medians for this period (That means standings above the 50% mark). Those with standings above the 50% mark include India, Russia, Indonesia, Brazil, Mexico, South Korea, and Malaysia. There are five countries with queue standings below their 25th percentile in the bottom quartile of their range. Those include Japan, China, the U.K., Canada, and France. In this comparison, the euro area barely escapes being categorized as it stands just above its bottom quartile with its 26.5 percentile standing. In contrast, U.S. standing is in its 40.8 percentile.

The median percentile standing for this group is a standing at its 40.8 percentile, which is the U.S. standing. As of January, half of the group had attained PMI values higher than they were in January 2020 just before COVID struck. The other half are still below their January 2020 levels. The manufacturing sectors globally are clearly making progress; however, the levels of activity are still low. Inflation is still excessive, but economies now appear to be mounting upward momentum as central banks begin to corral inflation excesses. However, improvement in all cases doesn't mean growth; it doesn't mean that manufacturing PMIs are above 50 yet. For this group of countries, there are still 10 reporters (nine countries plus the EMU region) that show manufacturing sectors still contracting. Hope springs eternal, if not growth!