The Global Recovery Slowdown‏

The global recovery stalled in April. Momentum in OECD’s leading indicator was flat. PMIs were soft in the U.S., China and Europe. The data is in line with the expectation of some slowing in global growth, driven mainly by a soft patch in the U.S. recovery.

However, we expect the current weakness in U.S. data to be short-lived due to strong fundamentals, lower oil prices and lean inventories. The euro area remains the weak link in the global economy, but we look for euro PMIs to resume a gradual rise over coming quarters. Chinese recovery is weaker than expected but, nevertheless, intact. We expect Chinese PMI to see a lift higher over the summer.

Details
Global PMI new orders fell 1.1 points to 50.9. We expect it to go sideways around this level for a few months, before going higher again during the summer.

In the U.S., the ISM manufacturing index fell further to 50.7, the lowest level in 2013. The forward looking details of the index were however, somewhat positive. Our inventory-demand index is also pointing towards improvement ahead.

The euro area saw a small fall in manufacturing PMI, which went from 46.8 to 46.7. In addition, data from the core countries have been weak. In Germany ifo expectations declined for the second month in a row, but are still at a level that points to higher activity in Q2. A pickup in German factory orders over the past two months suggests the economy will improve soon. Finally, the OECD’s leading indicator still points to a slight euro recovery. Scandi PMIs were overall negative. Danish manufacturing confidence fell significantly; Sweden and Norway both saw small decreases in PMIs.

The China HSBC PMI fell from 51.6 to 50.5. However, the OECD’s leading indicator for China is still pointing to improvement. We look for a moderate recovery in GDP growth and PMIs over the summer. In Japan, PMIs improved slightly but the overall picture from Asia was mixed, pointing to a softening in activity. In the CEE countries, PMIs new orders generally decreased, whereas industrial production increased.

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