U.S. Expected To See Stronger Growth In H2 13 And 2014

In June, the global economy showed the first signs of a strengthening recovery after a period of softness. Global PMI new orders increased somewhat, and leading indicators showed a similar picture.

The improvement was driven solely by the developed economies, as Chinese weakness continues. We expect this pattern to persist in the coming quarters. We believe the U.S. is working its way through the soft patch, seeing stronger growth in H2 13 and 2014. In Europe, gradual recovery is expected to continue, but we could see bumps on the road stemming from the Chinese weakness. China is now expected to remain soft for the rest of the year given the recent financial tightening.

Details
Global PMI new orders rose marginally from 51.3 to 51.5. OECD’s global leading indicator continues to rise, but is losing some momentum.

In the U.S. the ISM manufacturing index rebounded from the previous month’s drop, and jumped from 49.0 to 50.9. New orders rose from 48.8 to 51.9. We look for a further rise in July where the index will also get a boost from seasonal factors still distorted after the financial crisis.

We have seen clear improvement in Europe over the past few months. Manufacturing PMI for the euro area increased to 48.8 – the highest level since early 2012. In Germany, ifo expectations moved from 101.6 to 102.5 and factory orders are also on a rising trend. U.K. PMI was very strong in June, rising to the highest level in two and a half years. Scandi PMIs were also generally strong. Danish manufacturing confidence increased significantly from -6 to 2. The Swedish PMI has also strengthened further.

In China, the PMI indices from both NBS and HSBC declined in June. The HSBC index sent a weaker signal on the state of the Chinese economy than the NBS index but both readings confirm that growth is slowing down in China. In Japan, PMIs and other surveys improved further, pointing to strong growth again in Q2. However, the general picture for Asia was a decline in PMIs. In the CEE, countries PMIs new orders increased further.

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