Economy in Brief

Composite global PMIs in February show more widespread improvement than deterioration. Only 6 of 24 reporting jurisdictions show composite PMIs below 50 indicating contraction. Only 36% of the reporters are slowing in February, month-to-month; that compares to 40% in January, and 36% in December.

If we look at the average tendencies over three months, six months, and 12 months, we see that the number of jurisdictions contracting varies between 7 and 10 over these three horizons. Looking at the tendency for slowing over 12 months 56.5% of the reporters slow compared to 12-months ago, over six months 87% slow compared to their values over 12 months, and over three months only 30.4% slow compared to their values over six months. There's a clear tendency for global composite PMI readings to improve.

The data show that the advanced economies are most uniformly getting better; the most advanced economies are the top panel of the table. Of the six jurisdictions, five of them are getting better in February, six are getting better in January. Over three months all six of them are getting better and this is after all six of them worsened over six months.

However, there is also more consistent weakness among the developing economies particularly for the Monetary Union, for Germany, and for France. For those 3 jurisdictions, the readings are persistently below 50 over the last three months as well as over three months on average, six months, and 12 months. Italy has some sporadic readings below 50; Spain keeps its composite readings above 50 on all those timelines; the U.S., also among the advanced economies, has readings above 50 on all those horizons. The only other group that shows the preponderance of readings below 50 is a scattering of countries in Africa: Zambia, Egypt, and Kenya.

The queue standings that rank these current standings over data from the last four years show persistent positive rankings below the 50th percentile for four of the six advanced economies in the top panel; these include the U.S., the Monetary Union, Germany, and France. Again, only Africa has a clustering of values that are below the 50-percentile mark and those include Zambia, Ghana, Egypt, and Nigeria. Qatar, a Middle Eastern nation, also has a standing below its 50th percentile.

Groupings of countries show the overall averages have been slightly improving over the last three months logging an average of 52.0 in February. The medians have been improving as well and the group median logs a value of 51.3 in February from 12-months to three-months to six-months. The progression is mixed for the average and there is increased weakness on that timeline for the median.

Swiss inflation both headline and core as well as HICP and its own domestic index (core and headline as well) have been showing sub-2% inflation for a quite a string of months. HICP inflation is 2% or less for the last seven months in a row with only one exception (2.1% in December). HICP core inflation, not yet available for February, is below 2% for five months in a row with no exceptions. The Swiss domestic inflation headline is below 2% for nine months in a row while core inflation on that index is below 2% for 10 months running. Of course, inflation in Switzerland is ‘always low.’ Over the past 18 years, inflation has averaged 0.5% with a median of 0.3%. While Switzerland is a success story to the rest of the world, Swiss inflation is still in the high side for, well, Switzerland.

These low rates of inflation are on the year-on-year gauge: no funny business- no three-month or six-month calculations and no disregarding special categories to engineer a 2% touch-down as some are trying to do in the U.S. Switzerland gets there with an unemployment rate at 2.2% in January. That unemployment rate is among the lowest 13% of all unemployment rates reported back to the year 2000.

Switzerland is proof that inflation can get back to normalcy. Of course, Swiss inflation had only peaked at 3.3% and its unemployment rate peaked at 3.5%. Switzerland had a much more muted Covid cycle than either the EMU or the U.S. And one cautionary note might be that Swiss unemployment bottomed one year ago and is currently engaged in a very modest up-creep, but an up-creep, nonetheless. The unemployment rate is still below the steady pace it had adhered to before Covid struck in 2019.

Inflation trends in Switzerland are on an accelerating trend but a slight one. Over 3 months, inflation accelerates in two-thirds of the categories in the table, according to diffusion calculations. Over 6 months, we find neutrally as inflation accelerates in only half of the categories; over 12 months, inflation is still broadly decelerating with acceleration present compared to the year-ago pace in only 16.7% of the categories – a marginal proportion.

Monthly inflation shows equivocation with the December diffusion rate at 58.3% (above 50% more categories are accelerating than decelerating), January is at 41.7%, and February’s diffusion is back at 58.3%. Over those recent months, we see some tendency for acceleration to become more prevalent than deceleration. However, this is happening with overall inflation at a very low pace: a 0.4% gain in December- that one is uncomfortable. But that is followed by a flat January and a rise in February of just 0.1% month-to-month. The compounded annualized pace over this three-month period has been just 2%.