Economy in Brief: 2023

The global total, or composite, PMI readings from S&P for August saw the slippage with both the average and the median readings for this group falling to lower levels in August compared to July after the average and median each had slipped in July relative to June.

Among the 25 jurisdictional readings in August, 19 of them show lower values in August compared to July, while 21 of them had shown lower values in July compared to June, and in June 21 of them showed lower values compared to May. There's a clear slowing going on based on aggregating individual results.

In August, 16 jurisdictions had diffusion readings below 50. In July, there were 19. Both months represent a sharp erosion from June when only five showed readings below 50. In diffusion terms, the reading of 50 is the line of demarcation between output increasing or decreasing.

Sequential readings over three months show 9 jurisdictions with average readings below 50, over six month 6 readings are below 50, while the 12-month habitat shows eight readings below 50. However, there is a sharp change in terms of slowing with 20 jurisdictions showing weaker 3-month averages than six-month averages whereas only five show weaker six-month averages than 12-month averages and only 8 show weaker 12-month averages than they had for the 12-month period of 12 months ago.

The Hi/Low percentile standings for individual countries show the percentile standings of the current months reading between the highest and lowest readings of the last 4½ years. In contrast, the queue percentile standings evaluate the current diffusion reading as a ranked position among all other readings, as in the top 90% of all readings or in the bottom 9% of all readings without regard to the actual magnitude of the reading; the reading is ordinal in percentage terms. The readings for the hi/low vs. the queue standings are quite different because the hi/low data are based on only three numbers while the queue standings are based on all observations in the period over which they are ranked. On data back to January 2019, the average and median low readings are in the 25 to 27 range for diffusion readings. The high readings are only at a level of 59 for the average and for the median. Because the low readings are so much lower (25 points from the lowest reading possible while high readings are some 40 points below the higher reading possible) the high low percentiles generate higher readings.

The queue percentile readings are quite weak, averaging a 42-percentile standing with nearly the same result as its median.

The composite PMIs blend the weighted readings for manufacturing and services in each responding unit. Weakness continues to be the order of the day, but it is still only creeping weakness since both the average and the median readings overall this month are above 50, indicating that expansion is still the most common result. A series of large countries and regions EMU, Germany, France, Spain, and the U.K. are below 50 on their composite readings; however, the U.S., Japan and China are still above 50 in August. But among all those large countries, only Japan improved month-to-month in August. Downward pressure remains in force broadly and among the large economies.

The global manufacturing sector showed uneven results in August with some of the larger economies showing some improvement, such as the euro area, Germany, France, and Japan. However, the U.K. and the U.S., both relatively large economies, show backtracking.

Among these 18 early reporting economic units, 10 of them show improvement in August. Looking at the changes in the manufacturing diffusion indexes between three-months and six-months shows improvement in six countries. Looking at the changes between six-months and 12-months, 10 countries show improvement. Looking at the changes between now in 12 months ago, there are only four that show improvements. Those four are Mexico, China, Russia, and India, but the data from Russia at this point are quite suspect since it is on a war-time footing. China, on the other hand, had been a long period of struggling as it has an entangled exist from Covid problems; it began to make some recovery. However, now it still struggles with various problems. China may not be an example of an economy on the upswing despite what the PMI trends are telling us. China does show deterioration over three months as does Russia.

We look at the median reading. The median for August is 48.8; this is slightly reduced from July's 49.2. However, August is still above June's level of 47.8. There's no discerning a trend from this choppiness. It's just clear that the manufacturing PMIs have been chopping around in an area below 50 showing some slight deterioration in the manufacturing sector, but there doesn't seem to be any trending in place. If we look at three-months compared to six-months compared to 12-months, we find the three-month average is at 48.5, just a tick higher than the six-month average at 48.4 which is the same as the average of 48.4 for 12-months. Once again, we get this sense the global economy has been frozen in this slight contraction phase that hasn't gotten better and hasn't gotten worse but with central banks fighting inflation and with this disruptive war going on between Ukraine and Russia. Given other geopolitical tensions, it's made the economic situation seem even more tenuous.