US comes back, eurozone back upwards, but Down Under things are looking down

Posted: July 2, 2013 in Australia, Global Economy
Tags: , , , , , , , ,

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Among the more positive news coming out of the US of late, there was one piece of darkness. While US consumers grew more confident, more jobs were created, and house prices rose, the darkness drew all eyes. The darkness was otherwise known as Purchasing Managers’ Indices, or PMIs, with the PMI for US manufacturing in May pointing to contraction, for example. Things looked quite different today, and altogether lighter, however.

The latest PMI for US manufacturing, this time for June, stood at 50.9 from 49. Any score over 50 is meant to be consistent with growth, so that was a relief.

There was more good news. The sub-index tracking new orders rose to 51.9, and the new export orders index rose to 54.4 from 51 in May. So far so good. Alas the PMI for employment stood at 48.7 – suggesting job losses. So while the news was bright, some darkness remained.

In Europe, the news was brighter, but only in the sense that navy blue is brighter than black, except that is for Spain. For once the news on this country looked promising; a kind of dark grey.

The PMI for Spanish manufacturing rose to 50 in June, a new 26 month high. Okay, 50 suggests growth is flat, but flat is better than contracting, and that is approaching the best piece of economic news for a very long time for Spain.

The PMIs for French, Italian, and Greek manufacturing also saw big improvements – 16, 23 and 24 months highs respectively. But then in each case the index was below 50, so that was darkish news.

To the surprise of many, the PMI for Germany fell sharply – down to 48.6, which was a two month low, and at odds with other more encouraging data that has seen the light of day recently.

Looking further afield, in China the PMI was down, but given that a major credit crunch is underway in China, the fall was not as sharp as many had feared. PMIs were also either below 50 or very close to 50 in Brazil, India, Taiwan, South Korea and Vietnam.

Australia is more interesting. The manufacturing PMI has been below 50 since 2001, but in June it rose to its highest level since February 2011. Although at 49.6, it still points to contraction. In Australia talk of recession is beginning to dominate. New Prime Minister Kevin Rudd looks as if he is trying to present himself as the man to lead Australia through and out of recession. With household debt high, house prices apparently overvalued, and with the slowdown in China sure to hit Australian commodity exports, the economy appears to be at its most precarious balanced for some time.

© Investment & Business News 2013

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