Economy in Brief

The S&P manufacturing PMI indexes improved in November as slightly more countries saw increases than saw deterioration. However, the median gauge slipped slightly on a month-to-month basis. Rather than thinking of the report as being better or worse month-to-month, it seems more productive to recognize how stable the readings have been over the past year, at least in PMI terms. The median readings for 12-month, six-month, and three-month averages across countries/regions are in a range of 48.6 to 48.7 – quite tight. The period-to-period changes are quite small except that the 12-month average compared to 12-months ago shows substantial slippage of 3.4 diffusion points. But since that slippage, the readings have been quite consistent.

The queue or rank percentile standings have a median at the 24th percentile; however, if we choose to place the monthly observations in a range of high to low, the median is at the 58.4 percentile. I prefer the queue percentile standings, because they include all the observations while the percent-of-range calculations only involve the very highest, the very lowest, and the current observations. The queue percentile standings reveal a few extremely strong readings. Mexico has a 96.2 percentile standing and that is matched by Russia - if you believe that response. India has a 65.4 percentile standing. Indonesia sports a 57.7 percentile standing. South Korea logs a 55.8 percentile standing. All the rest of the standings are below the 50th percentile which places them below their historic medians. The most industrialized and developed countries are giving us the worst readings in November.

Diffusion measures the percentage of countries where there is improvement; that reading goes to a 61-percent diffusion reading for 12-months compared to 12-months ago. There is also a 61-percent diffusion reading for six-months compared to 12-months and a 50-percent reading for three-months compared to six-months. In the current month the diffusion reading has a 66.7 percent breadth reading implying an improvement in about two-thirds of the observations compared to one-month ago. Breadth is generally improving slowly. The grey highlights in the table flag those observations with diffusion readings above 50. There you can see that readings above 50 have not been sporadic but have been consistent with Mexico, Russia, India, and Indonesia showing readings above 50 on a consistent basis; South Korea shows a reading above 50 in November alone.

The percentile standings for groups at the bottom of the table reveal that the queue percentile standing for the U.S., the U.K., European Monetary Union, Canada, and Japan is at the 16.9 percentile. BRIC countries are at their 53.8 percentile, while the average for Asia is at its 34.6 percentile. The BRIC readings are considerably influenced by Russia where the economy is believed to be performing poorly although Russia continues to report extremely strong readings. India tends to report PMI values above 50, while China and Brazil tend to report PMI values below 50.

GDP trends cooled across the European Monetary Union in the third quarter as updated GDP reports begin to emerge. Quarter-to-quarter growth in the monetary union fell by 0.2% in Q3 after rising 0.6% in Q2. Finland, France, Germany, Ireland, Portugal, and the Netherlands all logged declines in GDP in the third quarter. Of the ten (EMU member and nonmember) countries presented in the upper portion of the table (below), GDP growth decelerates in six of them; in addition, there is deceleration for the monetary union as a whole. The United Kingdom also shows decelerated growth in the third quarter. Pooled together, the four largest EMU economies register deceleration, the rest of the monetary union on its own decelerates, the median for the monetary union decelerates, logging a 0.5% decline in GDP in Q3 after a 1% gain in Q2- decelerations are rampant. The major exception to these trends of course is ‘across the pond’ generated in the United States where 5.2% GDP growth in Q3 trumps a 2.1% gain in Q2. Acceleration lives...but the Fed is quickly seeing deceleration in its wake, a reason to moderate its policy path. We are living in an age of kinder-gentler central banks…for better-or-worse.

GDP growth rankings are weak- The far-right hand column of the table chronicles the ranking of GDP growth on data since 1997. Among European Monetary Union members, only Portugal has a ranking that exceeds its historic median on this timeline (above its 50-percentile). The median result for the nine reporting EMU members in the table is a standing at the 24.5 percentile, right at the border for the bottom quartile of the historic queue of growth rates. Of course, this stands in marked contrast to United States where its 5.2% growth rate has a 72.7 percentile standing, a standing nearly in the top quarter of all growth rates over the same period.

Growth rates in the table are color-coded to emphasize slowdowns and speedups. The four quarterly year-over-year calculations for each country or area show a preponderance of red numbers indicating slowdown. GDP growth has been slowing down persistently just about everywhere apart from - you guessed it-the United States.