The publication of today’s service purchasing manager’s indices for EU countries and China boosted investor sentiment this morning, driving gains in European markets ahead of what turned out to be a huge U.S. jobs number.
Let’s look at the big picture (via @MarkitEconomics), though, for a broader understanding of what’s happening in the global economy right now—in particular, the private sector measured by purchasing managers indices (PMIs):
Photo: Markit via Twitter
Clearly, the European Central Bank’s liquidity measures have boosted Italian, Spanish, and French PMI, but these countries are still among the weakest performers in the global economy—Italian and Spanish economic activity are still declining sharply, Ireland is actually getting worse, and France is just barely scraping by. Only Germany is maintaining any economic strength.
In fact, if we’re going by PMI, the whole idea that the BRICs are suffering misrepresents what’s really going on—only China is nearing a slowdown. India, the United Kingdom, and the U.S. are way out front in terms of economic expansion, with Brazil and Russia close behind.
Perhaps most importantly, a strong U.S. PMI suggests that the private sector is really speeding up, and perhaps even replacing a lot of government deleveraging. This confirms what we suggested in the wake of last week’s GDP miss—dramatic drops in government spending may be dulling the numbers, but the economy really is returning to health.