ChartBrief 114 – Global Flash Manufacturing PMI Ticks Up In July

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ChartBrief 114 – Global Flash Manufacturing PMI Ticks Up In July

The July round of flash manufacturing PMIs showed a slight but important rebound in the “global flash manufacturing PMI” (an indicator we put together based on the Markit readings).  Our data show the global flash reading up +0.4pts to 54.3 – which is the highest reading since February this year, thus while the move is not huge, it is very important that the indicator has begun to accelerate again after a period of consolidation.  On the detail, it was driven by a stronger US: +1.2pts to 53.2 which offset falls in Europe (-0.6 to 56.8) and Japan (-0.2 to 52.2).

As for the market implications, the US 10-year bond yield has shown a habit to move in line with this indicator, and for now appears to be diverging to the downside.  Either way this is an opportunity because it means one of these two series is likely to move to close the gap.  But as the second chart shows, acceleration or rate of change in the indicator is important, so we will need to see follow-through for bond yields to move higher.  For now at least it removes some of the doubt that the softer June reading brought, and lines up with our broadly constructive medium term view on global growth.

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The "global flash manufacturing PMI" improved to a 6-month high in July, and while the move was small, the fact it's accelerating again is very important and follow-through will be key.

As the companion chart shows (6-month rate of change), acceleration is just as important as levels, and after the big acceleration in 2016 there has been a reset, so if we do see follow-through on the July improvement then that will provide fuel to higher bond yields.

Global flash manufacturing PMI

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Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.

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