Economy in Brief

Haver Analytics is launching today its inaugural ‘Charts of the Week' publication. Every Friday we will publish six charts accompanied by a brief overview and some commentary that showcase our databases (including new data additions) and our analytics. Most of these charts will drill into the latest global economic dataflow and highlight some of their more noteworthy trends and implications. But we will aim to flag other topical data points too from our non-macro offering including, for instance, from our ESG database.

A common theme from our charts this week is the downside risks that have been accumulating for the world economy in the last few weeks. Forward-looking survey data have fallen, or are closer, to levels that have previously been associated with recessions. Most major central banks, in the meantime, have either continued to lift interest rates and/or communicated – with greater zeal - their intentions to do so not least because labor market activity is still quite strong. Emerging market economies in the meantime have remained under pressure, in part because of a strong US dollar, but also because of ongoing weakness in China. Finally geopolitical tensions have remained intense in Eastern Europe, which is magnifying supply-side bottlenecks, not least in the energy sector, and further disrupting economic activity on the broader European continent.

Global growth Last week's flash PMI data for the US, Euro Area and Japan suggested that aggregate output contracted in August and to a degree that - excluding the first wave of pandemic lockdowns - was the steepest since the global financial crisis in 2009. A similar message emerged from this week's final manufacturing PMI for China.

Among the 18 countries and regions surveyed in August, 13 of them worsened month-to-month. That’s a clear bias in terms of numbers of countries that saw manufacturing weaken in August. Among the exceptions were Indonesia, China, Russia, France, and Turkey.

Over three-months compared to six-months, once again there are 13 members of this group that show worsening. Over six-months compared to 12-months, there are 16 members that show worsening. Over 12-months compared to the average from 12-months ago, there are eleven members out of 18 that show worsening.

The median observation in August deteriorates only 0.2% from the month before. Over three-months, the median observation deteriorates by two points from the six-month average. Over six-months, even though there are more worsenings than improvements, there is a slight, 0.4%, improvement in the median observation compared to the 12-month average. And over 12 months, despite the lowest worsening count of all these horizons, there was a decline in the median of 1.7 points.

Queue rankings On balance, the worsening is gradual and ongoing, but it is bringing the manufacturing PMI levels down to much lower levels. If we look at the queue rankings over the last 4 ½ years, there are only four out of 18 members whose August observations rank above their median values over the last 4 ½ years. Those are Russia, India, Indonesia, and Malaysia. As for large economic areas, the euro area has a 32.1 percentile standing, the U.S. has a 22.6 percentile standing, the U.K. has a 3.8 percentile standing, Japan comes close to its median with the 49.1 percentile standing, and China has a 17-percentile standing.

PMI values since before Covid struck Half of the respondents in the table have higher manufacturing PMI standings than they did in February 2020 on the brink of COVID striking. However, the euro area, Germany, France, and the U.S. show increases that are improvements of barely one point or less over this span of 2 ½ years. The strongest gains from February 2020 are from Japan that’s up by 3.7 PMI points, and Russia that’s up by 3.5 points. After that, Vietnam is up by 2.2 points (based on its July reading), and Malaysia is up by 1.8 points. All-in-all conditions have not been very robust over the last 2 ½ years.