The Purchasing Managers Index (PMI) is widely regarded as a key leading indicator of health within an economy as it reflects real economic activity, with numbers above 50 indicating growth, while numbers under 50 contraction. Now bearing in mind the vast majority of growth over recent years has come from the Emerging Market economies, in particular China and its neighbours then a marked slowdown in this region should be of real concern to all of us.
Unfortunately however the news this morning is far from great, as the PMI data looks weak from a number of key emerging economies, as the following charts (all from Markit) highlight. As usual Click/Tap the chart to enlarge:
China:
Taiwan:
South Korea:
Malaysia:
Indonesia:
This is not a happy story and coincides with the worrying signs that global trade is suffering a real slowdown, as we highlighted last week:
Source CPB Click/Tap to enlarge
This data coincides with analysis from a growing number of Asia watchers who feel there is a very worrying trend developing here that could rapidly spill over into markets and economies globally, although we cover this in more detail in coming posts.
At least there is some comfort to be found in the Eurozone and UK, where PMIs have come in positive, even if they are far from shooting the lights out:
Eurozone:
UK:
However pity poor Greece which has suffered so badly at the hands of the Euro-buffoons as it plumbs new and frankly astonishing record lows:
The corrosive equilibrium has clearly dissolved and investors should be very cautious and on the look out for a tipping point/black swan event, which could rapidly dispel the illusion of normality.
The risks of things speeding up and getting very worrying very fast seem higher now than they have since 2008.