Global Leading Indicators A Notch Higher

Summary and outlook
Global leading indicators generally strengthened over the past month pointing to continued recovery in the world economy.

In the US ISM remains very strong relative to other soft indicators and we expect it to level off soon. PMI in the euro area is expected to go sideways in the short term before rising a bit further in 2014. We look for Chinese HSBC PMI to peak in Q1 14.

We expect the global recovery to stay close to trend growth in Q4 but move up a gear during 2014.

Details
Global PMI new orders increased to 54.8 in November from 53.3 in September. It points to continued growth close to trend for the global economy.

In the US ISM increased in November - despite expectations of the opposite – to 57.3, which is the highest level since April 2011. The details were strong as well with strong new orders, new export orders and employment indices. Also the order-inventory balance increased. Still, most leading indicators suggest ISM is in for a decline in coming months. This would also be more in line with continued soft growth in Q4 as most other indicators suggest.

In the euro area flash PMI composite was 51.5 in November, still pointing at continued recovery, albeit the index has declined slightly the past two months. ZEW and IFO both improved and point at continued improvement. M1 and the credit contraction remain main drags on the recovery. UK data continue to be very strong. Scandi indicators in general trend higher.

All manufacturing PMIs in Asia for November are now above 50. Overall the development in the manufacturing PMIs in China is still consistent with a slight improvement in GDP growth in Q4 13. In Japan data are still very robust as PMI reached a new cycle high and Tankan is rising. OECD leading indicator points to slower growth in 2014. Data for CEE countries give clear recovery signal.

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