Economy in Brief

Today’s data from the UK covering the housing market and the manufacturing sector suggest the economy is rolling over. The good news is that inflationary pressures appear to be easing at the same time.

The key elements of note from these data releases were as follows:

• The Nationwide house price index fell by 3.4% in the year to May, the biggest annual decline since July 2009. Average prices now stand at around 4% below their August 2022 peak.

• This news chimed with data from the Bank of England showing net mortgage lending slumped in April. Mortgage lending specifically declined from net zero in March to £1.4 billion of net repayments in April. Excluding the COVID era, this is the lowest level on record.

• That data chimed too with the accompanying news for net mortgage approvals, which fell from 51,500 in March to 48,700 in April.

• As for manufacturing this latest S&P Global manufacturing purchasing manager’s Index (PMI) fell to 47.1, down from 47.8 in April, although upwardly revised from the earlier flash estimate of 46.9. The details of this report were equally soggy, showing falling new orders and sharply rising finished inventories.

• Brighter news, however, emerged on the inflation front. For example, there were signs of further easing in supply chain pressures. And this was accompanied by a sharp retreat in input and output price pressures as well. In fact, average input costs actually fell for the first time since early 2016 (see chart).

The Asian PMIs show somewhat mixed patterns over the last year and across the recent three months. In May alone the average manufacturing reading stepped back to 49.8 from 51.0, leaving May weaker than April or March. Manufacturing PMIs for this select group of Asian countries improved in only one-third of the estimates in May, compared to improvement for 50% of them in April and one third of them in March. None of these trends is particularly striking.

However, the three-month averages show that 44.4% of the countries experienced increased PMIs compared to the six-month average. Over six months 55.6% improved compared to the 12-month average. And 55.6% improved for the 12-month average compared to the year-ago 12-month average.

The unweighted standing for manufacturing overall is at its 43rd percentile with five of the reporting countries having readings below their respective 50th percentiles. That means they lie below their medians for the period. Thailand has the strongest standing with a 96.2 percentile reading, while Myanmar has a reading at its 84.9 percentile. For the most part, the manufacturing percentile standings are moderate to low.

There are few services observations; China and Japan present services/nonmanufacturing observations. The Japanese figures here are still preliminary. Still, services from 12-months to six-months to three-months are trending stronger there. Across the individual recent three months, the Japanese services sector has remained firm. China’s nonmanufacturing readings weaken over the recent three months.

May is a showing of mixed performance in Asia for services. Japan shows weakening PMI services data from 12-months to three-months with a small bounce in between, while China shows slight strengthening over those same horizons for nonmanufacturing. Neither country, however, shows markedly strong moves in either direction.

The bottom line is that Asia seems to be listless for both manufacturing and services, without strong momentum. Percentile standings indicate that weak levels accompany the meandering momentum trends in manufacturing. PMI readings with few exceptions are weak compared to where the various PMI levels have been since January 2019. Services tell a different story of relative firmness enduring.