Economy in Brief

The Standard and Poor’s Global composite PMI data for May show some degree of resilience. Among the 22 countries and regions featured in the table, the average composite PMI rating rises to 53.5 in May from 51.5 in April. The median reading rises to 54.0 from 53.8. There are only two jurisdictions with readings below 50 indicating contraction; this compares to three in April. For both months, the readings on the number of contractions are quite low. However, the number showing slowing rises to 11 in May compared to 5 in April.

U.S. trends diverge- The fork in the road... To avoid confusion, let me point out that I have presented both U.S. measures in the exhibits. In the table (below), for comparability, I have the U.S. composite as presented by S&P so it's completely comparable with everything else in the table. However, in the chart at the top, I present the U.S. nonmanufacturing or services PMI from the ISM, the survey I prefer. The ISM is showing much more weakness in the U.S. than the S&P reading on the services sector. The chart reveals significant weakening in the U.S. compared to other members whose surveys are based on S&P data. The S&P survey shows some strengthening in the U.S. for the composite, not just less weakness.

S&P readings show resilience overall... The data in the table also showed that the average reading is increasing sequentially: from 12 months to 6 months to 3 months from 51.6 over 12 months on average to 52 over 6 months on average to 53.3 over 3 months on average. The median region also increases from 51.2 over 12 months to 51.8 over 6 months to 53.5 over 3 months. S&P data are consistent with the notion that there's been some firming in the global indexes and a back-off in activity in the manufacturing sector.

Still, there is little evidence of composites showing contraction. The number of jurisdictions with readings below 50 over 12 months is five, the same as for 6 months; that number diminishes to 3 over 3 months. The number readings that are slowing over 12 months compared to 12-months ago is 20; the number slowing over 6 months compared to 12 months is 7; the number slowing over 3 months compared to 6 months is 3. In terms of either slowing or outright contraction, both approaches show that there is less weakness in train according to the S&P readings applied to sequential data. Recall that the monthly data do show that there's a more significant broad slowing in May compared to April, but that's on the month-to-month comparison alone.

Percentile standings have become more midrange Percentile standings based on the queue method of assessment show only three jurisdictions with readings below their medians since January 2019. Those three are Sweden which is exceptionally weak with the 2% standing, Egypt with a 36.7 percentile standing, and France with a 40.8 percentile standing. All the rest have standings that are above their historic medians which means they have queue percentile standings above the level of 50. India in May logs its highest composite PMI reading since January 2019; Japan logs a 98-percetile standing on the same period.

Today’s estimates of the UK services PMI suggest that business activity continued to expand during May, thanks to a strong rise in output and incoming new orders.

The key details were as follows:

• The S&P Global / CIPS UK Services PMI Business Activity Index was 55.2 in May, a modest decline from 55.9 in April and upwardly revised from the earlier flash estimate of 55.1.

• New export orders expanded as a result of an increase in tourist numbers, alongside solid demand for business services from US and Europe. Job creation also continued as firms recruited more staff to meet business needs, while wage pressures also persisted.

• Input price inflation rose to a three-month high due to elevated wage levels and ongoing supplier price hikes for items such as food.

• The composite PMI-which weighs the manufacturing and services sectors combined- fell to 54.0 in May, down from 54.9 in April.

French manufacturing registered a gain of 0.7% in April following a 1.1% decline in March and a 1.3% increase in February. Trends in French manufacturing show output is up by 2.1% over 12 months, rising at a 2.8% annual rate over six months and rising at a 10% annual rate over three months showing steady acceleration in the gains for output.

Trends by sector By sector, the trends are not so clear, but they are largely supportive. For consumer durables, output rises by 9% over 12 months, slows to a 2% gain over six months and then rises at an 8.1% annual rate over three months. Durable goods trends do not support the acceleration hypothesis. Consumer nondurable goods show output lower by 0.8% over 12 months, falling at a slightly reduced 0.5% annual rate over six months and then rising by 1.3% at an annual rate over three months. This progression offers strong support to the acceleration hypothesis. For capital goods, output is up 8.7% over 12 months. It improves slightly to an 8.9% annual rate over six months, and then reverts to an 8.7% annual rate pace over three months. The output for capital goods is strong and firm across all three horizons, but that doesn't support the idea that output is accelerating. It does support the idea that output is strong. Intermediate goods output falls by 2.5% over 12 months, falling at a 2.1% annual rate over six months, then advancing at a 3.5% annual rate over three months. Intermediate goods support the acceleration hypothesis as output swings from declining over six and 12 months to growth over three months.

Auto cross-currents Separately the output of autos shows sequential slowing. Output is up by 35.5% over 12 months, slowing to a 6.6% pace over six months and then slowing further to 2.6% annual rate over three months. Auto production also shows sequential slowing monthly, from February to March to April. The trends in output belie the strength in motor vehicle registrations with registrations firm-to-strengthening showing a gain of 25% over 12 months, slowing slightly to a 20% annual rate over six months, and accelerating sharply to a 65.5% annual rate over three months. But vehicle registrations do slow their growth monthly, from February to March to April; the growth rates for registrations in each of those months erode although each month shows ongoing strength. Sometimes trends simply refuse to be consistent in their messaging.

Quarter to date This is the first month in the new quarter. The quarter-to-date statistics at this point are rather tenuous. The calculation looks at the growth in April compared to the first quarter base of spending on average. By that calculation, industrial production is growing at a 2.1% annual rate in the second quarter to date. This is led by a 12.9% annual rate gain in consumer durable goods, a 6.6% annual rate gain in capital goods, and a 3.3% annual rate gain in intermediate goods. These gains are offset by a 2% decline in the output of consumer nondurable goods. Also in the new quarter, auto output is falling at a 7.7% annual rate while motor vehicle registrations are up by a strong 48.8%.