HSBC: The worst of the global manufacturing slowdown could be over

The latest Purchasing Managers Index data coming out of Europe on Tuesday wasn’t exactly inspiring.

It only ticked up to 53.1, from 53 — essentially the smallest possible gain. That led PMI provider Markit to say that Europe is struggling for a “significant gain in momentum” when it comes to the economy.

The purchasing managers index (PMI) figures are given as a number between 0 and 100. Anything above 50 signals growth, while anything below means a contraction in activity — so the higher the better.

But according to HSBC, the worst of the manufacturing slump that has helped crush global growth in the past few years, could be over.

The bank released its monthly round-up of PMI data on Wednesday, and says that there is some cause to be cautiously optimistic when it comes to manufacturing across the globe, saying that “the worst may be behind us” when it comes to global PMIs.

Here’s what global economist James Pomeroy had to say (emphasis ours):

The global manufacturing PMI ticked up in March to 50.5, pointing to very marginal growth. US data was reasonably good, with the ISM manufacturing rising to an eight-month high of 51.8. The Markit release also ticked up but most encouragingly, both releases saw a significant improvement in new orders, suggesting that things may improve again going forward.

The bank includes a handy chart to show to how PMIs across the globe ticked up in March, led by emerging markets, which hit a ten-month high in March. That was helped by good numbers coming from China, as well as a small rebound in Brazil.

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PMIs ticked up across the board in March. HSBC

While HSBC says that the worst may be over, the bank isn’t exactly suggesting that there’s going to be a huge jump in global growth imminently. It is still arguing that growth is going to be nothing other than “slow and steady” for a while yet. Here’s the bank again (emphasis ours):

Although it is clearly a positive development that global PMIs improved in March, the small scale of the improvement means that we cannot be too optimistic about global growth at this point. The US services sector continues to be a relative bright spot, but global manufacturing and European data are weighing on the overall picture. Just as in February when we could not read into one month of weaker data, we need to see a continued improvement to be sure that the worst is behind us.

While we’re not expecting a sharp downturn in global growth, this month’s PMI data suggest more of the same: slow and steady.

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