Quantitative Macro | Global PMI

S&P flash PMI readings for this selected group of early reporting eight countries continues to show relatively mixed performance across the eight countries in the table. Trends, however, suggest a phenomenon that is largely unexpected because it shows some strengthening in manufacturing against weakening in services. During this period, when US tariffs have been threatened (and counter tariffs mooted as well) - and only recently imposed. We might have expected manufacturing to be doing worse and for the services sector to be relatively steadier. It may simply be too soon for this trend to play out, or, it may be that manufacturing, in fact, has ramped up slightly in the months just before tariffs took effect as manufacturers tried to slip goods across customs portals before the tariff walls went up. In any event, the tariff walls that were threatened were not the ones that went up, and the more modest tariffs were put up in the United States except those imposed against China but even there the tariffs that eventually were set in place for the interim, we're lower than the ones that had initially been threatened.

Data show that in year-to-year changes, there's been a broad strengthening that has occurred across this 8 country area with 24 sector observations recorded – that is 3 sectors (manufacturing services and a composite) for each country across eight countries. In this mix, there are only 5 sector readings that are weaker on a year-over-year comparison. However, over six months compared to 12 months and over three months compared to six months, the weakening dominates, with 13 of 24 sectors showing weakening over six months and with 14 of 24 weakening over three months.

The monthly data that are more volatile showed that there is more weakening in March than there was in February by a large factor, as 18 sectors weakened compared to six improving. But, after March, both April and May showed only 11 sectors weakening month-to-month with 13 improving. The monthly data, however, tend to hop around, and the current monthly data are still available on only a flash basis and are subject to change.

More fundamentally we can evaluate these sectors by the queue standings of their flash readings. In May this entails ranking the sectors back to January of 2021. On this basis eight of the 24 sectors show standings above their 50th percentile, putting them above their medians for the period. Only 1/3 of the sectors are performing at a better-than-median level in comparison with data back to 2021, a period that has not been a period of any particular strength. The current median value for the queue standings for the overall (or the comprehensive) index is in and its 40th percentile. That compares to a 52nd percentile standing for the manufacturing median and a 35th percentile standing for the services median. So, manufacturing is doing relatively better (relative to its median) and services are doing relatively worse than they may have generally since 2021. On this group of countries, the manufacturing PMI has averaged 51.7 on the period compared to services averaging a slightly stronger 52.7. The comprehensive average has been 52.4. These are relatively low performance results for the full period.

This period of course includes the tail end of the COVID period, plus the recovery from COVID and then it includes the period when the Ukraine invasion by Russia began and its ongoing aftermath. And now, in early 2025, it's going to start including the period where the flirtation with tariffs began. We will be on the lookout to see how the tariff negotiations progress and how the imposition of whatever tariffs arise out of this works out. For now, the concerns are that the uncertainty over what will happen with tariffs is going to be adversely affecting activity, and, of course, there are geopolitical shifts, among them Europe becoming more responsible for its own defence, which should push more economic activity generally into the European theatre.