Economy in Brief

Manufacturing PMIs from S&P waffled in July. Among the 18 reporters, 44% of them improved on the month, a slightly greater proportion than the 38.9% than improved in June and the 33.3% that improved in May. But in all those cases, there is more deterioration than there is improvement although the median reading rose in July. It rose, but it didn’t smell like one.

The median reading improved on the month, rising by 1.4 points to a level of 49.2. The reading from manufacturing overall is below 50, confirming that output continues to decline globally. Looking at the averages from 12-months to 6-months to 3-months. The median over 12 months is 48.7, falling back to 48.4 over 6 months and to 48.2 over 3 months. The data show a very gradual erosion and on the other hand also some relative stability at readings that are just slightly deteriorating in a zone below stable output. Yeah… the results are somewhat uncomfortable, but they're not terrible. The trends don't clearly suggest that deterioration is eminent or that rebound is in the making. It's just a steady drum beat of underperformance and slightly depressing news.

Month-to-month 9 of 18 reporting countries and economic units in the table saw their manufacturing sectors worsen. Over 3 months twelve of these reporting areas worsened; 8 worsened over 6 months compared to 12 months; and over 12 months, 14 are worsening compared to 12-months ago. There's not a clear signal here from the progression. Clearly, the year-on-year comparisons are the weakest and there's some let-up in that weakness over 6 months, but then on the transition to 3-months there's a deteriorating tilt once again and we are left unsure where momentum is headed.

The rank, or queue percentile, standings have a median value in the 25th percentile, in the lower quartile of their range of values for the various countries and reporting units as of July. Only four countries have readings in their 80th percentiles: those are Indonesia, ostensibly Russia, India, and Mexico. The very weakest rankings are in the most developed areas: a 3.8 percentile standing in the EMU, a 3.8 percentile standing in Germany, a 3.8 percentile standing the U.K., and a 5.8 percentile standing in France. The proximity of extreme weakness to the war zone is notable - except for Russia, of course.

China's manufacturing sector improved slightly on the month with its PMI reading moving up to 49.3 from 49.0 in June. The reading is still below 50 so it continues to indicate contraction, but there is less contraction than there was a month ago. China has four straight months of manufacturing readings below the level of 50.

The manufacturing PMI reports 11 components, four of which decline month-to-month in July; they are output, employment, new export orders, and imports. Among the 11 component readings, eight of them have individual sector diffusion readings below 50, indicating contraction for that metric.

In June, 8 of 11 components weakened month-to-month with only two component readings having PMI standings above their 50th percentile; the two that scored the highest were delivery speeds and the output, although they were both very mildly above 50 at readings of 50.3 for output and 50.4 for delivery times.

May saw weakening across 10 of 11 components with only delivery times strengthening month-to-month; only delivery times have a reading above its 50th percentile.

Manufacturing readings in China continue to display levels of activity that hover about the unchanged level. March saw a bit of a rebound in the index, but it subsequently lost that bloom and has been below 50 for most of the recent months. In fact, in the 16 most recent months, the Chinese manufacturing PMI is below the diffusion reading of 50 in eleven of those months. During that stretch, two of its ‘above 50’ readings are at 50.1 and another is at 50.2. Clearly the last year and a half has been a weak year for Chinese manufacturing.

Average data show 3-month readings below the breakeven 50-diffusion mark in 9 of 11 areas. Over 6 months, 7 readings are below the diffusion value of 50, while over 12 months, all the sector readings except the one for output average below 50. These statistics confirm a great deal of subpar performance in Chinese manufacturing recently.

The queue percentile standings for the Chinese data from July 2023 back to 2005 show the PMI headline and all the sectors with standings below their 50th percentile except for only two sectors: delivery times and stocks of major inputs. For the rest, the fact that readings are below the 50th percentile mark means that they are below their medians for the period. Delivery times have a 67.7 percentile standing which put them barely into the top one-third of its historic readings, while stocks of major inputs have a 58.5 percentile standing, above its historic median.

The manufacturing PMI itself stands in its lower 10-percentile, which is extremely weak; new orders run low, in their 12th-percentile, output is in its lower 10-percentile, and new export orders in their lower 7th percentile. Imports are in their lower 12th percentile and so on. The percentile standings are extremely low and reinforced the signal that not only are diffusion values showing significant weakness across components as well as contraction, but the level of activity indicated by these sector readings compared to what they show historically are extremely weak readings.