Economy in Brief

S&P manufacturing PMIs for February show a much more mixed bag than in previous months. Of the 18 reporting entities in February, 11 improve month to month. So, on a country count, there are more improvements than deteriorations. However, looking at the median level month-to-month, it is still lingering below ‘50’ indicating contraction in the lexicon of diffusion indexes - even though the median value does improve slightly month-to-month. As I noted, a mixed bag.

Sequential data also show complicated trends. The average PMI for manufacturing over three months is slightly better than over six months but only by a tick comparing 48.5 to 48.4. That's still showing a sector decline in terms of PMI diffusion index values. Over six months only 5 reporters show improvement compared to 12-month values. There is net deterioration over 12 months where there are only 5 reporters out of 18 that improve compared to 12-months ago.

Despite the slight firming on the month, there is continued contraction in manufacturing being reported although the contraction being reported is quite small. Still, the median queue standing that evaluates the current month has a standing compared to where it's been since 2019 at its 37th percentile. On that timeline back to January 2019, only six of 18 entries show percentile standings above their historic medians. On that span, the median is marked by a 50-percentile standing. Oddly - and interestingly- China and Russia both claim 98 percentile standings on the period, the highest in the group. Part of that is a reflection of how weak they have been.

The changes since COVID arrived, back to January 2020 levels, show there are eight reporting regions that have current manufacturing PMI values above their January 2020 levels: that’s over a span of three years. There's been very little growth overall as the median change has been a decline of 0.2 in the median PMI index.

Asian reporters in the table have fared better than the whole group overall. They log an average PMI value of 50 in February and sequential averages from 12-months, to six-months, to three-months show a progression higher. Their percentile standing at the 48th percentile is higher than the median for the group. China’s improvement and exit from a zero Covid strategy is helping.

Japan's industrial sector sputters and declines looking like a car that is running out of gas in January. January output fell by 4.3%, that is a sharp drop, after being flat in December and rising 0.7% in November. Progressive growth rates show that output growth is declining and decelerating. Japanese output is down by 3.2% over 12 months, falling at a 10.6% annual rate over six months, and then falling at a 13.5% annual rate over three months.

Manufacturing- This weak result is driven by manufacturing which saw output fall by 4.6% in January and where the sequential growth rates for overall manufacturing mirrors the path for industrial production and is getting progressively weaker as well.

Sector performance- Sector growth rates in Japan for consumer goods, intermediate goods, and investment goods show output on the decline and clearly decelerating across all of these categories. In January, output falls in all three sectors as it dropped 3% for consumer goods, 5.2% for immediate goods, and 4% for investment goods. Consumer goods output is holding up better than output in other sectors; still, the increase in output is just 3% over 12 months, it's up at a 1.1% annual rate over six months and it's dead flat over three months. Intermediate goods output falls 7.5% over 12 months, drops at a 14% annual rate over six months and declines at a 21.5% annual rate over three months. Investment goods output falls 1.1% over 12 months, then falls at a 20.3% annual rate over six months, and at a stunning plunge at 35.7% annual rate over three months. Manufacturing in Japan is unequivocally weak and output is unequivocally declining and it's declining in all sectors and it's declining on all tenors.

Two industries- Two industries saw increases in output in January. Mining output increased 1.3% and electric & gas output increased by 0.2%. Mining still shows sequential weakness with output down 6.2% over 12 months, followed by a 6.4% annual rate decline over six months, then accelerating to a 12.5% annualized rate decline over three months. Electric & gas output falls 4.2% over 12 months, accelerates to a 9.6% annualized rate decline over six months, but then logs an 8.1% annualized increase over three months, largely on the back of a one-month rise in December.

QTD Output is falling on a quarter-to-date (QTD) basis early in the first quarter. These calculations take output in January and gauge its annualized growth rate centering the calculation’s base on the average for the fourth quarter while compounding the growth rate. Early in the first quarter, output is falling at a 22% annual rate with manufacturing output falling at a 23% annual rate. Consumer goods output is falling at about a 10% annual rate, with intermediate and investment goods output each falling at a rate of 30% or faster. The decline in output in the first quarter is deep and broad.