When reviewing the tables below, it is important to remember that a number below 50 indicates a contractionary environment. S&P Global Composite PMI data for most countries declined on a m/m basis and several made new lows for the year. That trend is unfolding in both manufacturing and services.
The Institute of Supply Chain Management’s Report on Business in the United States reflected a further softening of economic activity. At the headline level, both manufacturing and services slowed to 50.2 and 54.4, respectively. Manufacturing has been flat to down since May of this year, currently hovering just above the contractionary mark of 50. New orders in manufacturing have been in contractionary territory in four of the last five months. New export orders in manufacturing declined again and have been in contractionary territory for the last three months. Services, now down for three consecutive months, fell by 2.3 points, which was its largest decline since February. New export orders in services declined 17.4 points to 47.7, its largest m/m decline on record going back to 1997.
Chinese business sentiment data, released by the China Federation of Logistics and Purchasing, also weakened in October. The headline manufacturing number has been in contractionary territory for most of 2022 with the latest report dropping -0.9 points to 49.2. All but two components in manufacturing are below 50 – not a good sign for global economic activity. The services side is also weak with just two components above 50. New orders in manufacturing and services declined in October to 48.1 and 42.8, respectively.
Until we get the November update on business sentiment, we can track the Chinese Yuan. The path of the Yuan versus the U.S. Dollar has broad implications for global economic activity. When the Yuan is down relative the U.S. Dollar, activity tends to slow. The exchange rate is currently at levels last seen during the Great Financial Crisis. On a year-to-date basis, the U.S. Dollar is up 13.94% versus the Yuan. If business sentiment was going to improve, we would likely see this trend start to reverse.
The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance. The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.
Senior Economic Analyst
Boyd Watterson Asset Management, LLC