Summary and outlook
- Global leading indicators lost some momentum in February, as US figures in particular disappointed, with the ISM deteriorating in both headline and forward-looking details. Global PMI fell slightly, driven by the decline in the US. However, data out of both Asia and Europe have been stronger, indicating that the weakening might only be temporary. OECD’s leading indicator also points to a further rise in Global PMI in coming months.
- The US has been leading the improvement in global manufacturing over the past few quarters but we believe the ISM is now likely to be close to a peak. We expect Chinese PMI to improve further and give support to risky assets. We expect European PMIs to continue increasing moderately, as we believe the recession will be short lived. Oil prices are the main risk now but have not yet reached levels that cause a serious threat to growth.
- Global PMI new orders in February fell back slightly to 51.4, down from 51.9 in the previous month. Despite the drop in new orders, we expect global manufacturing to hold its ground over the coming months, signalling that the recovery is still underway.
- In the US, Manufacturing ISM fell for the first time since October last year, falling from 54.1 to 52.4. The details weakened as well, as new orders fell from 57.6 to 54.9 – the largest part of the decline was, however, attributed to a big fall in the less important supplier deliveries index. We continue to look for a rise in ISM towards 55 but, with weak private consumption and adverse seasonal effects, we remain cautious.
- In the Euro area, manufacturing PMIs continued to improve slightly. However, the figures for the debt ridden southern countries have yet to show signs of recovery.Scandinavian manufacturing PMIs continued to send positive signals, particularly in Norway, whereas Sweden has failed to gain momentum.
- In Asia, the overall picture continues to improve. With Chinese PMIs rising further, we are looking to see a soft landing, with slightly improving growth in coming quarters. In CEE PMIs have yet to take off but we expect to see improvement as eurozone demand recovers somewhat. Brazil PMI continues to edge higher, signalling continued expansion in the manufacturing sector.
