Everything goes in cycles, but here’s what you can say about this moment in the economy: It’s the Western, developed economies that are on the upswing, while Asian economies (developed and emerging) are faltering.
During the crisis, and in the immediate aftermath, there was a lot of talk about how the future belonged to Asia, and the strength of the Chinese economic model. No country plowed as much into stimulus as China did.
But if you take one look at today’s PMI data, you can see a brand new story. Asian economies are looking sickly. Europe and North America on the rise.
Sam Ro summed it up this morning:
…we’ve learned that most of Asia is either decelerating or contracting. Japan, South Korea, Taiwan, and Indonesia all reported deteriorating numbers in July.
China’s official PMI number climbed, but its unofficial HSBC PMI number fell.
The global economic tides appear to be turning. Economic data in recent weeks have shown that China’s hot economy is slowing quickly.
Meanwhile, the beleaguered eurozone economies have been showing signs of life. Italy, France, Germany, and Greece all reported notable improvements in activity.
The U.S. economy seems to be heading in the right direction. The ISM and PMI surveys both showed significant gains.
Why has this shift happened?
There are a few things going on. For one thing, the US has made extraordinary strides in deleveraging, and working off the burdens that the economy faced before, during, and in the immediate aftermath of the crisis. Here’s a great series of charts demonstrating exactly that.
Meanwhile, China, whose growth drives much of Asia (and commodity exporting emerging markets in general) is seen as slowing for both cyclical reasons (working off the excess capacity it built up in responding to the global slowdown) and structural reasons (the great demographic dividend seems to be coming to an end).
Things always go in waves, but for now that’s the story. And it’s a good reminder that when everyone is convinced that one country has it figured our, and provides a new model for how an economy managed, if you just give things some time, a new story will probably emerge.