So, the preliminary purchasing managers’ index (PMI) reports are being released around the world, and overall they have been much stronger than expected.
PMI is based on a survey of purchasing managers, and it captures a wide array of information including activity, orders, prices, employment, and outlook. Any reading about 50 represents growth.
Let’s run through some of the big reports:
China PMI (52.0 in July, 51.0 Estimated): This was an 18-month high. “Economic activity continues to improve in July, suggesting that the cumulative impact of mini-stimulus measures introduced earlier is still filtering through,” said HSBC’s Hongbin Qu. “We expect policy makers to maintain their accommodative stance over the next few months to consolidate the recovery.”
France PMI (49.4 in July, 48.3 Estimated): This was a 3-month high. “The French private sector economy remained in reverse gear in July, dragged down by weakness in the manufacturing industry which offset a small improvement in services,” said Markit’s Jack Kennedy. “PMI data remain consistent with quarterly GDP close to stagnation levels, as the economy continues to show little sign of turning around its recent sluggish performance.”
Germany PMI (55.9 in July, 53.8 Estimated): This was a 3-month high. “Following the joy of lifting the football World Cup trophy, July’s flash PMI results provide further positive news for Germany,” said Markit’s Oliver Kolodseike. “A deeper look into the data shows that the main driver of the strong PMI reading was the service sector, where companies reported the steepest increase in activity for just over three years. That said, manufacturing also made a positive contribution to the numbers, suggesting that the economic upturn remains broad-based.”
Eurozone PMI (54.0 in July, 52.8 Estimated): This was a 3-month high. “Business activity picked up again in July to suggest that the economy is growing at one of the strongest rates we have seen in the past three years,” said Markit’s Chris Williamson. “However, even with the resumption of stronger growth, the survey data suggest the region‟s GDP is expanding at a modest pace of approximately 0.4% per quarter. Importantly, this growth is not fast enough to encourage firms to take on staff in sufficiently large numbers to have a meaningful impact on unemployment. The July survey once again saw only very modest job creation.”
But not all of the news was good.
Japan PMI (50.8 in July, Down from 51.5 in June): “Japanese manufacturers’ new orders remained in growth territory for the second month running, while there was a rise in new exports for the first time in four months,” said Markit’s Amy Brownbill. “These weren’t enough to prevent output stagnating, although this most likely reflects a little payback from the solid gains seen in June and the on-going unwinding of the impact of the the hike in sales tax earlier in the year.”
Japan Trade Balance (822.2 billion yen deficit in June, 642.9 billion yen estimated)
South Korea GDP (+3.6% in Q2, +3.7% estimated)
Net net, markets seem to be reacting positively to all of this. In Europe, Britain’s FTSE 100 is up 0.1%, France’s CAC 40 is up 0.6%, and Germany’s DAX is up 0.4%. Asia closed with Hong Kong’s Hang Seng up 0.7%.
U.S. futures are up modestly with Dow futures up 28 points and S&P futures up 3 points.