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CONFIRMED: GLOBAL ECONOMY IS COMING TO A SCREECHING HALT


Economic Indicators: Purchasing Managers Index (PMI)

PMI is a very important sentiment reading, not only for manufacturing, but also the economy as a whole. Although U.S. manufacturing is not the huge component of total gross domestic product (GDP) that it once was, this industry is still where recessions tend to begin and end. For this reason, the PMI is very closely watched, setting the tone for the upcoming month and other indicator releases.

The magic number for the PMI is 50. A reading of 50 or higher generally indicates that the industry is expanding. If manufacturing is expanding, the general economy should be doing likewise. As such, it is considered a good indicator of future GDP levels. Many economists will adjust their GDP estimates after reading the PMI report. Another useful figure to remember is 42. An index level higher than 42%,over time, is considered the benchmark for economic (GDP) expansion. The different levels between 42 and 50 speak to the strength of that expansion. If the number falls below 42%, recession could be just around the corner. (To learn more, read Recession: What Does It Mean To Investors?)

 

Manufacturers Around The World Slowed Down In April

April 29, April 30 (All Times EDT)

April 30, May 1

May 1, May 2

 

The European Implosion Continues

…All of the reports can be found on this page, but here’s the quick rundown.

Italian PMI rose slightly to 45.5, up from 44.5 last month. But that’s still far below 50, and it makes 21 months of economic contraction.

Spanish PMI again rose slightly, from 44.2 to 44.7, hardly anything to get excited about.

French PMI rose to a 4-month high of…. 44.4. Bad.

The German situation actually got even worse, falling from 49.0 to 48.1.

A distressing number came yesterday from Ireland, which clocked in at 48.0, down from 48.6. Ireland is supposed to be one of Europe’s strong recovery countries.

And finally Eurozone total PMI hit a four month low of 46.7.

JPMORGAN: Global Manufacturing Is Near A Standstill

According to JP Morgan, the global manufacturing PMI fell to 50.5 in April, down from 51.1 in March.

global pmi

JP Morgan, Markit

 

 

global pmi

JP Morgan, Markit

Goldman Confirms Global Slowdown Is Deepening

Downward revisions to previously ‘hopeful’ levels for Goldman’s Global Leading Indicator (GLI) suggest a significantly softer patch for global activity consistent with subdued growth in the near-term. The GLI has now been in ‘slowdown’ phase for four consecutive months and while it has not reached the ‘contraction’ phase yet, empirical results show this phase far less supportive of risk-assets than the current exuberance suggests. With Korean Exports, Global PMIs, and Industrial Metals all disappointing, the most concerning aspect is Goldman’s three-key-risks (US growth, Euro ‘risk’, and China growth) have all upticked significantly in recent weeks after consistently falling all year. As the Swirlogram below indicates, the ‘Slowdown’ is deepening.

 

The Swirlogram has spoken

 

 

Markets Don’t Want a Strong Economy: Bob Doll

Stock markets don’t want a strong economy, since a resurgence in growth would mean the end of cheap money and heighten worries about inflation, said Bob Doll, chief equity strategist at Nuveen Asset Management.

“So many people want a strong economy. Beware of what you ask for. I think a decent economy is required for the stock market, but not a strong one,” Doll said on“Squawk on the Street” Thursday. “A strong one will bring the questions, ‘When is the Fed done? When is inflation coming back? When is the end of the cycle?'”

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