Summary and outlook
Global leading indicators have become more mixed recently as Chinese and US PMIs are weaker, while Europe and Asia outside China still look strong.
The US ISM took a major dive in January partly due to weather effects. While we expect US growth to moderate to a 2.5% pace in H1 14 from 3.75% in H2 13, we believe the decline in ISM has been exaggerated by the negative weather impact. Euro area manufacturing PMIs came out strong in January but are expected to move sideways in the remaining part of Q1. China continues to lose momentum and we see some downside risk in the short term from Chinese data.
Following stronger global growth in H2 13, we expect a moderation in the first half of 2014 followed by re-acceleration in the second half of the year – see also The Big Picture: Resilient recovery despite EM wobbles.
Details
Global PMI new orders was almost unchanged in January with only a slight decrease to 54.3 from 54.4 in December. The index is still at a very high level and points towards growth close to the trend for the global economy.
In the US ISM dropped sharply to 51.3 from 56.5 in December, the lowest since May last year. Bad weather is mentioned in the ISM report as a main factor, making it difficult to judge the real momentum in the US.
In the euro area the final manufacturing PMI continued its upward movement to 54.0 from 52.1 in December - the highest level since May 2011. This suggests growth in the euro area above 0.5% q/q in the beginning of 2014. PMI manufacturing figures from both Germany and France showed strong increases and Spain also showed a further improvement, pointing to clear upside risk to growth estimates. UK PMIs for services and manufacturing have levelled off a bit recently but are still at robust levels. Scandi indicators are generally improving – especially Danish confidence looks strong.
HSBC manufacturing PMI fell below 50 in January as it declined to 49.5 from 50.5 in December last year, suggesting growth in China is still slowing. In Japan PMI new orders increased to 59.2 from 57.2 in December, keeping it on a very high level.
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