IHS Markit reported last week that its composite Purchasing Managers Index (PMI) rebounded slightly in its first reading for June 2018. In January, the index had managed nearly 59, the highest in a very long time. It was taken as a definitive sign that Europe’s economy was not only booming, that boom was sustainable.
Global liquidations struck at the end of January and now Europe’s economy doesn’t look so steady. In terms of IHS Markit’s PMI, it reached a low in May of 54.1 before picking back up to 54.8 this month. The small rebound was the work of the services sector alone.
European manufacturing may be entering a phase of even greater uncertainty. The manufacturing PMI for Europe came in at 55, the lowest in a year and a half. It’s not whether the number is above 50 or not, nor does it matter how far above, rather what these things tell us is the possible marginal direction as it may be changing (second derivative).
From IHS Markit’s press release:
Factory order inflows rose at the weakest pace in 22 months, while export growth remained close to the lowest for over one-and-a-half years.
This is becoming a more persistent theme. If there is to be globally synchronized growth, which there was supposed to be last year, any synergy attained by that coordinating trend will be via global trade. That’s why the big EM buying binge in 2017. If global trade really rebounds, as it should given this expectation, they will benefit handsomely especially after being so beaten down by the last “rising dollar.”
The uneasiness over the theory is more and more palpable the further 2018 progresses. Germany’s IFO surveys of German businesses record the same outlines also for June. The Financial Times (thanks M. Simmons) characterizes it appropriately enough for what may be only the early stages:
German businesses have got a modest case of the jitters, unnerved by the darkening prospects for global trade.
