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Global PMI data is mostly in contractionary territory.

Purchasing Managers’ Index (PMI) data can be used as a gauge for economy activity within manufacturing and services. The survey seeks to capture whether activity has improved or worsened versus the prior month. A print below 50 is an indication of contraction versus the prior month. S&P Global U.S. Composite PMI fell 1.4 points to 45.0 and has been below 50 since July 2022. S&P Global U.S. Manufacturing PMI fell 1.5 points to 46.2, its second consecutive month in contraction. S&P Global U.S. Services PMI dropped 1.5 points to 44.7 and has been below 50 since July 2022.

Source: Macrobond – S&P Global.

The Institute of Supply Chain Management (ISM) U.S. PMI data for manufacturing declined 0.6 points to 48.4, its second consecutive month in contraction. New orders dropped 2.0 points to 45.2, now below 50 in six of the last seven months. Production dipped below 50 for the first time this year after declining 3.0 points to 48.5. The prices component dropped 3.6 points to 39.4, down 47.7 points from its March 2022 peak. Overall, 82% of the data is in contraction, up from 9% at this time last year.

Source: Macrobond – Institute of Supply Chain Management.

ISM U.S. PMI for services have managed to hold up better than manufacturing. However, in December the headline number declined 6.9 points to 49.6, its first visit below 50 since May 2020. New orders dropped 10.8 points to 45.2, also its first time below 50 since May 2020. Only new export orders and inventory sentiment showed gains, but the former is still in contraction and the latter moved above contraction after being below 50 in nine of the last eleven months. Overall, 55% of the data is in contraction, which is up from 27% in November.

Source: Macrobond – Institute of Supply Chain Management.

This slowdown is not just a U.S. phenomenon. In December, more than 75% of countries’ composite data fell below 50, according to S&P Global’s measure. Looking at manufacturing alone, 70% of countries are below 50. Services have also seen a significant slowdown with 67% of countries in contraction.

Source: Macrobond – S&P Global.

The main takeaway from this data is that economic activity moved from bad to worse from July through year end. Our view is that we will likely continue to see a global economic slowdown through at least the first half of the year.

 

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.

 

Joseph Khoury

Senior Economic Analyst
Boyd Watterson Asset Management, LLC