Economy in Brief

Among the 25 countries/regions reporting composite PMIs that reflect the manufacturing and services sectors of their respective economies, only four show improvement in June. Those four are Russia, Saudi Arabia, United Arab Emirates, and Egypt. The domination of oil producers on the list is notable. We mark Zambia as unchanged as its data are unavailable in June. We use the May value for June only in the case of Zambia. This overall result is a substantial step-down and worsening from May when only 13 reporters logged worsening. In April, only 7 had cited a worsening.

The sequential averages show worsening over 3-months compared to 6-months in only seven reporters, a worsening at 6-months compared to 12-months for only five reporters and a worsening over 12-months compared to 12-months ago in 14 reporters.

Some weakening The month’s data are sharply weaker (month-to-month), showing much more breadth of weakening than what we've seen in some time although the PMI averages have not so sharply deteriorated. The average PMI stands at 52.1 in June and the 12-month average is 51.5. That compares to a 3-month average at 53.0; its 6-month average is at 52.3. This sequence shows improving PMI averages over shorter, timelier, periods (except month-to-month). The medians also show improvements from 51 over 12 months to 52.3 over 6 months to 53.0 over 3 months. However, in the month-to-month data, the April reading is 53.8, rising to 54.0 in May and then dropping to 51.5 in June. The median and the averages both show a fall-off in June; however, the PMI values remain above 50 indicating economic expansion based upon the comprehensive composite PMI readings.

Little contraction PMI readings show composite PMI is below 50 in June indicating contraction for only five countries; that compares to three in May and three in April. For the three-month average, there's only three weaker compared to six-months; for the six-month average there's only three weaker than over 12 months. For the 12-month average, there's only five weaker than a year-ago. While there is great concern about a coming global slowdown and potentially a global recession based upon composite PMIs, there aren't many countries or regions now that are experiencing contraction.

Much weakening in June On a month-to-month basis, there's a much more significant indication of slowing with 20 of 25 reporters showing weaker values in June compared to May. That compares to 13 in May compared to April and 6 for April compared to March. Over three months there are seven out of 25 that show weakening compared to six months; over six months there are five that show weakening compared to 12 months, but over 12 there are 18 that show weakening compared to 12-months ago. Even so, we can see that the tendency for weakening is mostly a month-to-month phenomenon that has emerged in June. It is not yet indicative of the broader trends.

Standings are weak and mixed The queue percentile standings place the current observations in an ordered queue of data back to January 2019; it shows the average standing at the 53.4 percentile mark and a median standing at the 50-percentile mark. That means that the median for the group over the period is at such a level that it corresponds to the median value for each reporter on average. There are 12 of 25 of the reporters with composites below the historic medians on this timeline.

Among the eighteen reporters of manufacturing PMIs in June, only seven improve on a month-to-month basis. The table treats Canada as unchanged. Its June value is not available; for the purposes of statistics and aggregation, we're using the May value for Canada in June.

Over 3 months, 7 reporters show improved reading compared to 6 months. Over 6 months compared to 12 months, 8 reporters showed improvements in their manufacturing PMIs. Over 12 months compared to their level of 12-months ago, only four reporters show improvement: those are Mexico, Russia, India, and Indonesia.

For the most part, manufacturing continues to be under a great deal of pressure. The median reading for this group of countries this month is 47.8 on a PMI basis. However, despite the breadth of the deterioration, the median measure has not changed very much over the three horizons. In the table, over 12 months the PMI average is 48.8, over 6 months it falls to 48.1, and over 3 months it stabilizes at 48.2. All of these diffusion values show manufacturing activity declining on balance (all below 50), but declines are not getting worse according to the median statistics although they are getting worse based upon deteriorating breadth.

The ranking statistics show only five of these reporting entities with June readings above their historic medians. India has a strong 92-percentile standing, Mexico has an 88.5 percentile standing, Russia reports an 84.6 percentile standing, Indonesia has a 78.8 percentile standing, and Turkey has a 71-percentile standing. Apart from those, the standing of the other countries is generally much worse with the highest among the remaining countries being Japan at 48.1% and after Japan the next highest ranking being at 19.2% for Taiwan and for South Korea.

For some of the larger economies, the U.S. has a ranking for its S&P Global manufacturing PMI at its 5.8percentile, the euro area is at its 3.8 percentile, and the U.K. is at its 9.6 percentile. The large countries show a great deal of weakness in their manufacturing sectors; Japan is an exception.

Comparing these readings to where they were in January 2020 before COVID struck, there are only six countries that show better manufacturing PMI values in June 2023 than they had in January 2020. These are Russia that has a 4.7-point improvement, Indonesia that has a 3.2-point improvement, India that has a 2.5-point improvement, Mexico that has a 2.0-point improvement, Japan that has a 1.0-point improvement, and Turkey that has a 0.2-point improvement. By comparison, the median shows the decline of 1.7 points compared to January 2020. The euro area is weaker by 4.5 points and the U.S. is weaker by 5.6 points.

Unemployment in the European monetary union continues at a very low level. The unemployment rate has come down and stayed down since peaking during the period of COVID. 2021 brought the largest decline in the unemployment rate to Europe while in 2022 the unemployment rate mostly stayed at lower levels; it has since worked to even lower levels in 2023.

The breadth of unemployment declines Twelve European Monetary Union (EMU) member countries report in the table; Five EMU members show declines in the unemployment rate in May compared to April. There had also been five declines in April compared to March, and there had been six declines in March compared to February. The breadth of the declines in the unemployment rates has been slightly less than 50% in terms of the number of countries affected; however, the proportion of countries experiencing declines in unemployment has been relatively stable.

Over the last 12 months, unemployment rates have fallen in seven of these twelve countries with the declines logged in three of the four largest countries; Spain is the exception seeing its unemployment rate rise by 0.1% over 12 months.

Unemployment rates in May range from a low of 2.9% in Germany and 3.5% in the Netherlands to a high of 12.7% in Spain and 10.8% in Greece.

The relativity of unemployment It's hard to compare unemployment rates across countries because of various labor market rigidities and differences in labor laws, custom-&-practice, and local unemployment treatment. Somewhat more telling is to compare the ranking of the current rate of unemployment to the history of unemployment country-by-country, the ranking of the current statistics. We do this on data back to 1994. On that basis, only Luxembourg has an unemployment rate that's higher than its median over this period. The median in these calculations occurs at a ranking of 50%. • Luxembourg's unemployment rate level of 4.9% is relatively low among EMU members; still, it's a rate that's above its own historic median. • Ireland with an unemployment rate of 3.8% has the lowest ranking unemployment rate among all countries in the table compared to its own history. • France comes next with the ranking of only 0.9% despite its unemployment rate being 7%. • Germany is next with the 2.9% unemployment rate that ranks 1.7% among the history of German unemployment rates back to 1994.

The ranking statistics, coupled with actual current unemployment levels, give you some idea of how different unemployment experiences have been across countries. The median ranking of the unemployment rates among the EMU members in the table is 14.1% while the average ranking is 19.2%. However, the ranking for the European Monetary Union overall based upon pooled and weighted data for the same period is 0.4%. The extraordinary difference between the ranking of the overall EMU measure and the average/median rankings of the individual members, reflects the fact that higher unemployment rates listed in the table are often for very small countries with small labor forces as well as that it also reflects the fact that unemployment rates are largely at very low levels for all countries at the same time causing the overall unemployment ranking could be even lower than the individual rankings. Only the ranking for Ireland is lower than the ranking for the entire European Monetary Union. That's an extraordinary result. It speaks to the breadth as well as the magnitude of the EMU unemployment rate decline.

U.S. and Japan In comparison, the U.S. unemployment rate at 3.7% has a 7.6 percentile ranking over the same period. Japan's unemployment rate, at 2.6%, has a 20.5 percentile ranking. Clearly, Japan has been used to having much lower unemployment rates than the European Monetary Union members generally.

Comparisons to Pre-Covid Since January 2020, before COVID struck, nearly all the EMU members report that unemployment rates are lower in May 2023. The exceptions are Austria, Belgium, and Finland among EMU members. The U.S. and Japan also are exceptions. Where unemployment rates are higher, they are generally only higher by 0.2- or 0.3-percentage points, except for Belgium where the unemployment rate is higher than January 2020 by one-half of one percentage point.

European trend Looking at the chart, we can see that for Europe COVID interrupted along ongoing decline in the rate of unemployment. COVID caused the unemployment rate in the EMU to shoot up sharply and then after making some slow and begrudging progress the EMU unemployment rate came down relatively quickly in 2021 and has come down further in 2023. However, it's hard to make statements about the recovery in the labor market by looking at the unemployment rates because COVID has also worked some mischief with employment with people's employability and with labor market participation rates as COVID put the fear of working into some people who otherwise had been gainfully employed.

Today’s GDP figures suggest that the UK economy has managed to avoid a recession in the first three months of this year, partly thanks to a pick-up in business investment.

The key points of the report can be summarised as follows:

• UK GDP grew by an unrevised 0.1% in the three months to March the same pace as in the previous quarter. This was in line with UK economists’ expectations.

• On the output side the small gain was mainly driven by an increase in output in the service sector which rose by 0.1% in Q1 after growth of 0.1% in the previous quarter.

• On the spending side, the gain in GDP was driven by a 2.4% rise in gross fixed capital formation (revised up from a prior estimate of 1.3%. A 3.3% climb in business investment volume was the main reason for this.

• Consumer spending volume, in contrast, was unchanged while government spending and net trade dragged output lower.

• Also published today were the June estimates of UK house prices from the Nationwide Building Society. These showed that house prices were fairly stable over the month, rising by a modest 0.1%, reversing a 0.1% m/m decline in May. On a year-on-year basis, however, prices fell by 3.5% after a 3.4% decline in May.