The July round of Markit manufacturing PMIs showed an ongoing theme of divergence among the major economies, but an interesting and important link-up between 2 of the major economies. The developed economies composite PMI showed a slight tick up in July, which was important to see after the softer readings since Feb. Likewise the emerging markets composite manufacturing PMI also ticked up slightly in July. Overall on both fronts the synchronized economic upturn that commenced in 2016 has transitioned to a more steady pace of expansion vs further acceleration.
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Part of the reason for that is the divergent results e.g. for DM: Eurozone 56.6 US 53.3 Japan 52.1 and EM: Russia 52.7 China 51.1 Brazil 50 India 47.9. As you can see it's quite a mix and the trends have been equally mixed. Yet overall we remain optimistic on the medium term outlook for global growth as the rebound in manufacturing confidence aligns with better global trade activity, rising property prices in the major economies, rebounding industrial production and corporate profit growth, and buoyant consumer confidence. Further, while the global trend in monetary policy is for tightening/normalization, there remains considerable stimulus in the system, which is clearly benefiting some countries.
After the synchronized upturn in 2016 transitioned to consolidation, divergence remains a theme.
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An important part of the tick up in both EM and DM manufacturing PMIs is the chart below. It shows an increasingly inter-linked trend between US and China PMIs, and should that tickup turn into an uptrend (not yet) it could shift the global economy into a new period of expansion.
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Article by Callum Thomas, Top Down Charts