Economy in Brief: 2022

The S&P flash PMIs for November show mixed results for the five early reporting composites that include the European Monetary Union, EMU members Germany and France, the U.K., and the U.S. Three of those five show stronger PMI composites while two show weaker composites. Stronger composites are reported by the European Monetary Union as well as Germany and the U.K. Weaker composites are reported by France and the U.S.

In the European Monetary Union, the strength in the composite occurs because of a stronger manufacturing reading. In Germany, the stronger composite also is the result of a stronger manufacturing reading. In the U.K., the strength is technical since the two components are unchanged on the month- the improvement results from rounding.

France shows a weaker composite reading despite a stronger manufacturing reading because services are weak, and the service sector reading dominates the manufacturing improvement. In the U.S., the composite is weaker on the back of manufacturing and services both weakening month-to-month.

These results follow October where all the sectors were weaker month-to-month except for services in Germany. In September, there was broad weakening: the U.S. was an exception with strengthening on the composite, manufacturing, and services. The U.K. had a stronger manufacturing sector in September. France had a stronger composite and services reading in September, while all the rest of the components and composites were weaker month to month.

The sequential averages are calculated on finalized data so they exclude data from November; they show weaker readings for 3-months compared to 6-months, and weaker readings for 6-months compared to 12-months for all the composites and all their components. Over 12 months, there was a broad weakening as well with only one composite improving, that's for France, while the services sector is improved for the European Monetary Union, France, and the United Kingdom.

Weakness continues... This continues to be a period of substantial weakness even though there's slightly more strength in November than what we've been seeing in recent months and on trend. There's very little significant increase; there are some technical rebounds on the month but nothing that looks truly impressive.

All the queue (or rank) standings for all the composites and for all components have standings well below their 50% mark which marks their historic medians for this period. The strongest reading in the table is the 27.6% standing for manufacturing in Germany, the second strongest is a 20.7 percentile standing for services in France, followed by 19 percentile standings for the European Monetary Union for its manufacturing and services sectors. Except for the German reading, these are all readings in the bottom one-fifth of their historic queues of values over this span, a period that goes back to February 2018.

The rankings by sector are consistently low with manufacturing for this group averaging a 14 percentile standing while services average a 15 percentile standing, and that combination is so weak that the composite averages a weaker 11.7 percentile standing.

The column labeled 'percentile' places this month's observations in a percentage position between its highest and lowest readings; these assessments are consistently higher than the queue standings (and less demanding). They are derived by looking at only three readings: the current reading, the highest reading on the period, and the lowest reading on the period. Of the 15 readings in the table, six of them have percentage standings in their historic ranges of value that are below their mid-range values (below 50%). The U.S. shows readings below their mid-range for the composite and both components. Apart from the U.S., composite readings have a standing the range from the 64.6 percentile in Germany to the 80.7 percentile in France. The manufacturing readings tend to be weakest with three of the four non-U.S. rankings below their historic range mid-points. The service sector rankings again excluding the U.S. are between the 65.9 and 80.4 percentiles among the four reporters in the top of the table.

The Bank of France retail survey fell by 3.7% in October showing a significant decline in sales volumes in the month. The decline interrupts a two-month string of sales volumes rising as volumes rose by 0.2% in August and by 2.5% in September.

Across the seven product categories for the month, all of them decline in addition to a decline in all industrial goods sales volume and then overall volume. October was a bad month for French consumers. Food purchases fell by 3.3% in October following declines in three of the four most recent months. Industrial goods sales volumes declined 3.9%, which is only their first to decline in the last three months but the third decline in the last five months.

Among other selected nonfood categories, textile sales volumes fell by 6.1% in October, footwear sales volumes fell by 8.2%, furniture volumes fell by 2.9%, household appliances saw sales volumes fall by 2.5%, electronics volumes fell by 7%, and new auto purchases fell by 9%. The declines across the various categories are relatively large declines for a single month.

According to sequential change calculations, sales volume changes over three months, six months and 12 months show declines in volume for overall sales on all three horizons but not a worsening trend. Total sales volumes fall by 5.4% over 12 months; that worsens to an 8.2% rate of decline over six months, but then the decline slows to a 4.4% decline over three months. Well, that's not a progressive worsening, but a 4.4% decline over three months is certainly not a walk in the park for real sales.

Food purchases are disturbingly weak Sequentially food purchases are weakening and weakening progressively. Food purchases fall by 7.9% over 12 months, decline at an 8.9% annual rate over six months and then fall at a 12.7% annual rate over three months. Such a progression for food, the most obvious consumer staple item, is certainly vexing. Food prices have been among some of the strongest rising and most persistent showing increases globally with the combination of international supply problems, drought, interruptions due to the war in Ukraine, and the lack of availability of fertilizer to help stimulate agricultural production. Food prices have been rising relentlessly globally.

Industrial goods sales For the category 'all industrial goods' the 12-month decline logged a -3.8% pace, the six-month decline is at a -8.3% annual rate, but over three months there's an increase in the growth of sales of 0.8% annualized. That's not much of an increase, but it does interrupt the string of negative numbers. Looking across the six nonfood categories over three months, there are declines in only two categories: household appliances and new auto sales. Household appliances show declines on all horizons at a pace that is somewhat unsettling although not a clear progressive deterioration. Household appliance sales fall 10% over 12 months and fall at a 7.6% annual rate over six months, but then they return to an even faster decline at 10.5% over months. Auto sales are somewhat more mixed with a 9.2% decline over 12 months, a 5.8% increase over six months and a decline at only a 0.4% annual rate over three months.

Other categories in the nonfood retail area show annual rate increases in sales over three months such as the 10.6% annual rate increase in textile sales, the 9.9% annual increase in electronics, the 1.6% increase in footwear sales, and the 0.8% increase in furniture sales. However, textiles and footwear show declines over six months and over 12 months and declines that are relatively steep. Only furniture sales and electronic sales show any progression that seems to have any life to it.

Sales growth rate rankings are low The ranking of the year-over-year sales figures shows abject weakness across all the categories. A ranking above the 50th percentile represents a growth rate in sales volumes that is more than its median increase. There are no such increases for any category as of October. In fact, the strongest year-over-year increase is from furniture sales with a 31.6 percentile standing, followed by a 21.1 percentile standing for new auto sales, a 20.6 percentile standing for electronics, an 18.7 percentile standing for footwear and an 18.2 percentile standing for textiles. The weakest category is household appliances with only a 6.7 percentile standing for its 12-month growth rate. For all industrial goods, the sales volume standing is in its 16.7 percentile. For food, the percentile standing is the weakest on this ranking. The data in the table are ranked over a period since June 2005. The food ranking therefore is the weakest ranking in year-over-year food volume sales in the last 17 years, an extremely significant development, especially recognizing that over that span there's been population growth.