investmentcontrarians.com / By Sasha Cekerevac / Apr 25, 2013
With the stock market at all-time highs, the momentum has been built on the belief that an economic recovery is close at hand and the world will avoid a global recession. However, new data show that perhaps this belief might be too optimistic.
Markit Economics has just released the Purchasing Managers’ Indexes (PMIs) for many nations and economic zones around the world. Frankly, the data are quite bleak, showing that an economic recovery is certainly not occurring anytime soon, and that a global recession is becoming a distinct possibility.
For April, the U.S. Flash Manufacturing PMI (early reading) came in at 52, versus expectations of 53.8, and last month’s data point of 54.6. Just a reminder: a PMI number above 50 is a sign of growth; below 50 is a sign of contraction. (Source: “Markit Flash U.S. Manufacturing PMI,” Markit Economics web site, April 23, 2013.)
While the U.S. manufacturing PMI data still show expansion, the decline was significant, as was the degree by which it missed expectations. This April PMI reading for the U.S. was the lowest in six months, and is an indication that the economic recovery in the manufacturing sector is starting to slow.
The PMI composite for the entire eurozone was a very poor 46.5 in April, down slightly from expectations of 46.8. While the reading was unchanged from March, it is worrisome that there were no improvements at all. There is no current economic recovery in Europe; in fact, this reading indicates that economic activity has declined for 19 of the last 20 months.
Is a global recession very far away? Obviously, predicting the future is impossible. What we cando is look for trends. Many people already know that the economic recovery in the southern European nations has been poor. Yet many investors had been hoping that Germany would be able to kick-start an economic recovery.
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