Economy in Brief

The Standard and Poor’s measures for manufacturing unemployment globally show somewhat mixed results tilted to weakness I went in October as 7 of 18 improved month-to-month while 11 of 18 worsened. The median observation for October fell by 0.6 diffusion points to 48.7, a value that indicates manufacturing contraction overall among this broad sample of reporting units.

Sequential trends Sequential trends show 8 of 18 reporters with improved manufacturing PMIs comparing average levels over three months to six months ago. Comparing average levels of six months to 12 months ago, ten of them are improved out of 18. The six-month mark shows that there has been a broad improvement compared to 12 months ago; however, over 12 months compared to the period of 12 months earlier, there is broad weakening; only five reporters show stronger values over 12 months than over 12 months ago.

Rankings Ranking data that assess the current October levels of the PMI among all data since January 2019 show that the average standing among that queue of values for these reporters is at the 26th percentile; that’s right at the bottom 25% of all observations for the period. This marks the current manufacturing set of estimates as quite weak. Mexico and Russia show percentile standings around the top ten percentile of data over this period. Only 4 reporting units show PMI values that are above their medians which means above the ranking of 50%; one country, South Korea, is right at its 50% mark. The two countries that are above their medians are above them moderately: India with the 59.6 percentile standing and Indonesia with a 57.7 percentile standing.

Compare to pre-Covid Compared to data back to January 2020, only four reporters show stronger values for manufacturing PMIs: Russia (if you believe it), Mexico, Indonesia, and India. South Korea sits at the same mark it had in January 2020.

On balance… On balance, manufacturing remains quite weak globally with little sense of momentum. The median for the PMI values from 12-months to 6-months to 3-months has crept higher but very little, moving from 48.5 to 48.6 to 49.1. These metrics compare to an October stand-alone median reading at its 48.7 percentile – weaker again.

Third quarter GDP in the European Monetary Union weakened and surprisingly contracted. GDP fell at a 0.4% annual rate in the third quarter after rising by a 0.6% annual rate in the second quarter. The unexpected drop has naturally raised questions about the possibility of a rule-of-thumb recession occurring in Europe (some report this as a ‘technical’ recession. However, there's nothing technical about two declines in a row {counting ‘all the way’ up to 2.} Rather, it is a rule-of-thumb that sometimes makes sense, and sometimes does not). We are reminded that in the first and second quarters of 2022, real GDP in the United States declined, with GDP falling at a 0.5% annual rate in the first quarter and then edging lower by a 0.1% at an annual rate in the second quarter. Almost no one called that a recession. Those that did probably did so more for political reasons than for economic reasons. The U.S. GDP drops were not considered to be part of a recession in the U.S. by anyone who looked at data seriously. The ongoing substantial growth in employment in the U.S. during those two quarters made the drops in GDP oxymoronic recession signals. This reference highlights the fact that recessions are more complicated than just a couple of numbers’ weakness quarter-to-quarter and it has a lot more to do with the economic processes that might be in play.

Europe....no recession but LOTS of weakness Right now, in the European Monetary Union, Italy reports a 0.4% GDP decline in the second quarter and flat GDP in the third quarter. Apart from that, no other early reporting country is flirting with a rule-of-thumb GDP definition. However, it's quite clear that there is a lot of weakness. • Germany, for example, shows low growth; it has GDP up by 0.1% in the second quarter after being flat in the first quarter and it has a decline in GDP in the third quarter, to go along with the decline in GDP in the fourth quarter of 2022. Germany, in the last four quarters, shows two declines in GDP, one quarterly increase of 0.1% (annualized) and another quarter which GDP growth was flat. We can certainly argue about whether this constitutes some kind of recession in Germany. It certainly constitutes an extremely weak period of growth for the German economy. • Ireland has two previous quarters of negative growth in the fourth quarter of 2022 and in the first quarter of 2023. That string is interrupted by a 0.5% increase in the second quarter and now a 1.8% annual rate decline in the third quarter. Ireland has three GDP declines in the last four quarters. • Portugal logs a decline in GDP in 2023 Q3 after an increase in Q1 of only 0.1% annualized. • The four largest European Monetary Union economies show tepid growth at a 0.1% annual rate in the current quarter after two quarters in which the annual rate for growth was 0.2%. They were preceded by one quarter in which GDP in the four largest economies fell at a 0.1% annual rate.