Economy in Brief

The total or composite S&P PMIs for July saw worsening as the global PMI is worsening, emerging markets are worsening, developed markets are worsening and are the weakest of all. This follows a similar performance in June when all three groups showed deterioration although May showed improvement for all three groups.

Sequentially, over 3 months, all three of these groups are worsening, over 6 months they're all improving, and over 12 months the overall and developed markets are worsening while emerging markets are improving.

The queue percentile standings show the global PMI with a 42.9 percentile standing, marking it below its 50th percentile and therefore below its median. The HSBC emerging market index has a 67.3 percentile standing, nudging it up into the top one-third in terms of historic standings. Developed markets have a 24.5 percentile standing, sending them to the bottom quartile of their range. This matrix of data portrays overall poor results for the global economy.

Unemployment in the European Monetary Union (EMU) held at 6.4% in June, a level that has been stable for three months running. In June, for a group of 12 of some of the oldest EMU members, the unemployment rate at the country level fell for three members: in Italy, Spain, and Greece. The unemployment rate rose month-to-month in Austria, Finland, and Luxembourg. This compares to May when the unemployment rate fell in five of the reporting members and in April when the unemployment rate fell in six of these members.

Which way does the trend blow? While there has been some enthusiasm recently about some improved economic data, particularly in the United States, where data have shown some firmness and inflation has been tempered, the unemployment rates in the European Monetary Union are showing signs of running out of gas when it comes to moving to lower levels. The question at hand is: are things getting better or is the improving trend ending?

Looking at the changes over various periods over 12 months, 6 months and 3 months, we find that unemployment rates have fallen on balance over three months in five EMU members; over 6 months they've declined for seven members; and over 12 months they've declined for six members. By comparison, unemployment rates have risen over 12 months for five members; they rose over 6 months for only two members; and they've risen over 3 months for five members. There's a little bit more back and forth in the changes in unemployment rates compared to the preponderance of declines that used to dominate the trends.

No real back-tracking yet However, what we're seeing for the most part is simply a slowdown in the decline of the unemployment rate while unemployment rates themselves remain at extremely low historic levels. The unemployment rate for the Monetary Union itself has been lower only 0.7% of the time. Across Monetary Union members, only two members have unemployment rates that are above their median and that includes Luxembourg and Austria. On the other hand, Germany has an unemployment rate that has been lower only 5.8% of the time. France has an employment rate that has been lower only 2.6% of the time. Ireland has an unemployment rate that's been lower only 0.3% of the time and the Netherlands has an unemployment rate that has been lower only 9% of the time. There are far more countries with extremely low rates of unemployment than there are countries with unemployment rates above their historic medians. Still, only Ireland is at an historic low rate; Germany and France are above their lows by 0.1 percentage points. But, on average, the unemployment rate low is 1.5 percentage points lower across these 12 members.

Comparing the European Monetary Union to the United States, the United Kingdom, and Japan (using the claimant rate for the U.K. to bring the data up to date), we find more backtracking in this group recently than we do in the Monetary Union itself. The U.S. shows the unemployment rate higher on balance over 3 and 6 months. The U.K. shows the claimant rate higher over 3, 6 and 12 months. Japan’s unemployment rate is higher over 12 months and 6 months but then lower over 3 months. The U.S. has an unemployment rate that has been lower only 5.8% of the time, Japan’s rate has been lower 15.5% of the time, while in the U.K. unemployment rate has been lower 60.2% of the time (based on the claimant rate).