Economy in Brief: November 2023

Technically the flash PMI readings are slightly stronger month-to-month in more places than they are weaker in November. But the improvements are small. Of the eighteen readings in the table, only six are weaker month-to-month in November, compared to nine of eighteen weakening in October and eleven of eighteen weakening in September.

Sequentially weak: The sequential readings weakened in seventeen of eighteen readings over three months, in fourteen of eighteen over six months and in fourteen of eighteen over 12 months.

Some monthly resilience: While monthly data are showing a bit of resilience in November, the sense of rebound is small and the trend weakness is impressively negative. The 3-month change column is relevant here because the sequential data are calculated on averages and only on hard data, not on flash values. So, the 3-month change column in the table is the 3-month change in monthly flash values. On that basis, seven of eighteen observations are weaker over three months - fewer than half of them. Weakness on that basis is across all sectors in France and in Japan. The EMU exhibits net sector weakness in the service sector over three months. The U.K. and Germany show some sizeable improvement over three months on this net basis while the U.S. shows moderate improvements across sectors over three months.

Weakness is the bottom line: The bottom line for these members, however, is still much more that conditions are weak. Ranked on Data since January 2019, the average composite rank of the six jurisdictions in the table is 24.9%. The average manufacturing sector rank is 12.6%. The average service sector rank is 31.1%. Of course, all these pooled observations are below the 50th percentile, leaving them well below historic median values.

Sector standings: Among individual country sector rankings only the service sector in Japan has an above 50-percentile standing, at its 61st percentile – no sector in any other country in the table comes close to that. And every sector in every reporter shows a reading lower than its January 2020 level before Covid struck, marking the last four years as having made no net progress in the wake of Covid.

Evaluating the Covid/post-Covid period: However, evaluating the individual country and sector results, over the past nearly five years, sectors have been above their January 2020 levels only about 48% of the time. The composite indexes were above their January 2020 levels just about half the time. However, the service sector was above its January 2020 level about 53% of the time while manufacturing was above its January 2020 level only about 40% of the time.

Manufacturing coming under less stress? Manufacturing clearly continues to be hard hit. While manufacturing has improved on the month in the EMU, Germany and the U.K., it has an average PMI ranking only in its 12th percentile. Over 3 months the manufacturing PMI has advanced the strongest- by 4.1 points- in the U.K., by 3.2 points in German, by 0.1 point in the EMU, and by 1.5 diffusion points in the U.S. Manufacturing is weaker over three months by 3.9 points in France and weaker by 1.5 points in Japan. There is a hint of improvement in manufacturing globally, but not much more than a hint.

U.K. industrial orders fell to -35 in November from -26 in October. The three-month average of the series is -26, weaker than its -20 6-month average and its -18 12-month average. Conditions in industry continue to deteriorate. The queue standing on data back to 1991 has orders weaker only 11.7% of the time. This is a weak headline for the CBI survey.

Export orders and the look-ahead to the next three months for output volume both weakened in November. Export orders fell to -31 in November from -23 in October. The outlook for output volume fell to -7 in November from +15 in October. Both export orders and the outlook for volume show ongoing worsening in their sequential averages.

However, price expectations are rising to +11 in November from +7 in October. That is still below September’s +14. And sequential averages from 12-months to 3-months show that diminished expected prices pressures have, up to this point, ruled the roost. Manufacturing output readings that lag by two months show progressive weakness, with output falling at a 7.1% annual rate over three months. Among the price expectations, manufacturing output trends, and volume expectations, there is evidence of weakening and of lingering inflation pressures. Prices have a 65.8 percentile standing, above their historic median. And despite its recent weakness, the year-on-year growth in manufacturing output has a 60-percentile standing, above its historic median. Some of the signals on growth and inflation remain mixed. Still, there is clear evidence of weakening in progress.