Just occasionally we see news that makes us smile and today (rather sadly as it points to proper economic dweebiness) it was the turn of the UK manufacturing sector to stick the middle finger up to the various doom-mongers who thought the BREXIT vote would result in an immediate return to the Middle Ages as that favourite indicator, the PMI, came in well above the break-even 50 line at 53.3, up sharply from the immediate post BREXIT fall to 48.3:
Source: Markit Click/Tap to Enlarge
Interestingly this is somewhat higher than that recorded by the Eurozone, which came in at 51.7:
Source: Markit Click/Tap to Enlarge
However to be fair Germany came in above the UK at 53.6, while France and Italy continue to struggle at 48.3 and 49.8 respectively.
This is particularly interesting when some economics houses continue to talk of the European cyclical upturn from mid 2015, which makes us want to look at the actual Eurozone GDP figures:
Source: TradingEconomics.com Click/Tap to Enlarge
Hmmmm…if that’s a cyclical upturn Europe is in deep trouble. Which of course it is for many, many, many reasons.
Interestingly Spain’s PMI came in just positive at 51, although as this is the supposed to be the exemplar of the European miracle recovery from depression this weakness is a problem, reflected in falling industrial growth rates:
Source: TradingEconomics.com Click/Tap to Enlarge
Of course most unbiased observers recognize that the pick up in Spanish VW/SEAT robot work was limited against struggling global demand, while that other GDP kicker, tourism still benefits from most of the country’s competitors being mired in political, terrorist and immigrant issues, however even that positive impact will slowly begin to fade as the base is adjusted to the new reality
Does this mean BREXITeers should be cheering? Of course not, this is but one data point, however it throws into sharp relief the absurd notion that the EU is a land of unfettered milk and honey when it is, in reality, stuck in a bit of a quagmire…..if not sinking irretrievably into the mud
Indeed with mixed global PMI’s generally hovering around breakeven (China flat at 50 after several negative years, India and Vietnam positive, but the ASEAN aggregate only just above 50, alongside poor old Japan just under) in a world of absurd monetary largesse BREXIT is so not an issue, as we discussed at the time with reference to the global PMI chart (HERE).
Indeed against the problems of epic asset overvaluation and ongoing financial legerdemain reaching truly appalling proportions (discussed HERE among other places) the City and Wall Street should perhaps focus on the rather terrifying concrete facts rather than getting their pants all twisted up over unknowable events, no matter how potnetially fraught they may be.
Any seasoned market participant knows full well the shadows are always lurking with potential problems, many of which melt away, while others appear from nowhere to bite the heads of the unwary. While there may be a Bear lurking out there called BREXIT the ones I fear are huge Grizzlies named Maths, Economic Reality and Liquidity…..if they lunge together we won’t have time to worry about BREXIT.