28/10/17: Trade vs Growth or Trade & Growth?

Much has been written down recently about the dramatic slowdown in growth in global trade flows. For example, after rebounding post-Global Financial Crisis (global trade volumes fell 10.46% in 2009) in 2010-2011 (rising 12.52% and 7.1% respectively), trade volumes growth slowed to below 4% per annum in 2012-2016, with 2017 now projected to be the first year of above 4% growth in trade (4.16%).

This has prompted many analysts and academics to define the current recovery as being, effectively, trade-less growth (see, for example https://www.bis.org/review/r161125c.pdf).

This is plainly false. In fact, growth in global trade volumes has outpaced growth in real GDP (based on market exchange rates) in every year since 2010, except for 2016. As the chart below clearly shows, the difference between the rate of trade volumes growth and the rate of real GDP growth remained positive in average terms:

Instead, what really happened to the two series that both real GDP growth and trade volumes growth have fallen significantly since 2011. Average growth in trade over 1980-2017 period stood 2.31 percentage points above growth in real GDP. The 2010-2017 period average gap between the two is 1.78 percentage points, the second lowest decade average after 1.48 percentage points gap recorded in the 1980s. However, these comparatives are somewhat distorted by influential outliers - years when post-recessions recoveries triggered significantly higher spikes in growth in both series, and years when trade recessions were substantially sharper than GDP growth slowdowns. Omitting these periods from decades averages, as the chart above illustrates, makes the current recovery (2010-2017 period) look much much worse than any previous decade on the record (green dashed lines).

Still, the above presents no evidence that trade weaknesses contrasted GDP growth trends. And there is no such evidence when we look at decades-based correlations between trade growth rates and GDP growth rates:

In fact, correlation between trade growth and GDP growth is currently (2010-2017 period) running at an extremely high levels of 96%, compared to historical correlation (1980-2017) of 87% and compared to pre-2010 average (1980-2009) of 88%.

So what has been happening, thus?

As the chart above clearly shows, there are significant differences in trends between the two series. Using indexing approach, setting 1979 = 100, we can compute index of real GDP activity and trade volumes activity based on annual rates of growth. The two series exhibit a diverging pattern, with divergence starting around the end of the 1980s, accelerating rapidly during 1993-2008 period and then de-accelerating since the onset of the post-GFC recovery. Notably, however, this de-acceleration simply slowed the expansion of the gap between the two series, and it did not reverse it or close it.

Currently, global GDP growth is just above the long-term trend. But global trade growth has been running below its historical trade since 2014. Back in 2004-2008 period, rate of growth in global trade vastly exceeded its trend. Why? Because 2004-2008 period was the period of rapidly inflating real assets bubbles around the globe - the period of ample credit and ample demand for investment goods and raw materials. Similar logic applies to 1994-2000 period of  In other words, the glorious days of global trade expansion, the period of accelerated growth in trade.

In other words, past periods of exploding trade volumes growth are unlikely to reflect sustainable trends in the real economy. These were the periods of substantial misalignment between trade and growth much more than the current period of slower trade growth suggests. In other words, something is happening to both trade and growth, and that, most likely, is what we call a structural slowdown or a secular stagnation.

9/10/17: BRIC Composite PMI 3Q: Failing Global Growth Momentum

Two posts above cover Manufacturing PMIs and Services PMIs for 3Q 2017 for BRIC economies. The following updates Composite PMIs performance.

Global Composite PMI came in at 53.7 in 3Q 2017, matching exactly 1Q and 2Q 2017 readings and basically in line with 53.6 reading in 4Q 2016. In other words, Global Composite activity PMI index has been showing relatively robust growth across the two key sectors for the last 4 quarters running. 

In contrast to Global indicator, BRIC economies posted relatively underwhelming performance with exception of Russia.

• Brazil Composite PMI index stood at 50.0 (zero growth) in 3Q 2017, which is a marginal gain on 49.8 in 2Q 2017. This marks the first time since 1Q 2014 that Brazil Composite indicator reached above the outright contraction levels, but it is a disappointing reading nonetheless. For one, one quarter does not signal stabilisation in Latin America’s largest economy. Worse, Brazil’s economy has been performing poorly since as far back as 2H 2011. It will take Brazil’s Composite index to hit above 52 mark for 2-3 consecutive quarters to start showing pre-2011 levels of activity again.
• Russia Composite PMI, on the other hand, remains the bright spark in the BRIC’s dark growth universe. Although falling to 4 quarters low of 54.1 in 3Q 2017, the index remains in strong growth territory. 3Q 2017 marked 6th consecutive quarter of robust post-recession recovery, consistent with 2.5-3 percent growth in GDP, quite ahead of the consensus forecasts from the start of 2017. The last quarter also marks the sixth consecutive quarter of Russian Composite PMIs running above Global Composite PMIs. This means that for the last 18 months, Russia has been the only positive contributor to Global growth from amongst the ranks of the BRIC economies.
• China Composite PMI firmed up in 3Q 2017, rising to 51.9 from 51.3 in 2Q 2017. 3Q 2017 reading was, however, the second weakest in the last four quarters and suggests relative weakness in the growth environment. 
• India composite PMI fell below 50.0 mark in 3Q 2017, reaching 48.7 - a level signifying statistically significant contraction in the economy for the first time since 4Q 2013. The robust recovery in 2Q 2017 put India Composite PMI at 52.2, but this now appears to be a blip on the radar which shows anaemic growth in 4Q 2016 and 1Q 2017.

As chart above clearly shows, the growth dynamics as indicated by the Composite PMIs have been weak in the BRIC economies over the last 4 consecutive quarters. This is highly disappointing, considering that 4Q 2016 held a promise of more robust expansion. Russian growth conditions have now outperformed Global growth dynamics in every quarter since 2Q 2016, although the latest reading for PMIs suggests that this momentum has weekend in 3Q 2017. In fact, Russian data is quite surprising overall, showing growth conditions largely in line with pre-2009 levels since 4Q 2016. This is yet to be matched by the GDP figures, suggesting that something might be amiss in the PMI data. 

Finally, the chart above shows sectoral dynamics for BRIC group of economies in terms of PMI indices. Both Services and Manufacturing PMIs for BRIC grouping are now running close to or below statistical significance levels for positive growth. More importantly, on-trend, current performance remains within the bounds of growth consistent with H2 2013-present trend: shallow, close to statistically insignificant expansion, that is distinct from robust growth in pre-2008-2009 period and the short period of post 2009 recovery.

Thus, PMI data still indicates that BRIC economies currently no longer act as the key drivers of global growth.

9/10/17: BRIC Services PMI 3Q 2017: Another Quarter of Weaker Growth

Having covered 3Q 2017 figures for BRIC Manufacturing PMIs in the previous post, let’s update the same for Services sector.

BRIC Services PMI has fallen sharply in 3Q 2017 to 50.8 from 52.1 in 2Q 2017. This is the lowest reading since 2Q 2016 (when it also posted 50.8). The drivers of this poor dynamic are:

• Brazil Services PMI remained below 50.0 mark for the 12th consecutive quarter, rising marginally to 49.5 in 3Q 2017 from 49.0 in 2Q 2017. Current reading matches 1Q 2015 for the highest levels since 1Q 2014. Statistically, Brazil Services PMI has been at zero or lower growth since 1Q 2014.
• Russia Services PMI fell to 54.0 in 3Q 2017 from 56.0 in 2Q 2017 and 56.8 in 1Q 2017, indicating some cooling off in otherwise rapid expansion dynamics. The recovery in Russian Services sectors is now 6 quarters long and overall very robust.
• China Services PMI decline marginally from 52.0 in 2Q 2017 to 51.6 in 3Q 2017. This is consistent with trend established from the local peak performance in 4Q 2016. Overall, Chinese Services are showing signs of persistent weakness, with growth indicator falling below statistically significant reading once again in 3Q 2017.
• India Services sector has been a major disappointment amongst the BRIC economies, with Services PMI falling from 51.8 in 2Q 2017 to a recessionary 48.0 in 3Q 2017. The Services PMIs for the country have been rather volatile in recent quarters, as the economy has lost any sense of trend since around 4Q 2016.

Table below and the chart illustrate the changes in Services PMIs in 3Q 2017 relative to 2Q 2017 and the trends:

With Global Services PMI remaining virtually unchanged (at 53.9) in 3Q 2017 compared to 2Q 2017 (51.8), with marginal gains on 1Q 2017 (53.6) and 4Q 2016 (53.5), the BRIC Services sectors are showing no signs of leading global growth to the upside since 3Q 2016. For the sixth consecutive quarter, Russia leads BRIC Services PMIs, while Brazil and India compete for being the slowest growth economies in the services sectors within the group.

As with Manufacturing, BRIC Services sectors show no signs of returning to their pre-2009 position of being the engines for global growth.

Stay tuned for Composite PMIs analysis for BRIC economies.

9/10/17: BRIC Manufacturing PMIs 3Q 2017: Lagging Global Growth

With Markit Economics finally releasing China data for Services and Composite PMIs, it is time to update 3Q figures for Manufacturing and Services sectors PMI indicators for BRIC economies.

Summary table:

As shown above, Manufacturing PMIs across the BRIC economies trended lower over 3Q 2017 in Brazil and India, when compared to 2Q 2017, while trending higher in Russia and China.

• Brazil posted second lowest performance for the sector in the BRIC group, barely managing to stay above the nominal 50.0 mark that defines the boundary between growth and contraction in the sector activity. Statistically, 50.6 reading posted in 3Q 2017 was not statistically different from 50.0 zero growth. And it represents a weakening in the sector recovery compared to 50.9 reading in 2Q 2017. Brazil's Manufacturing sector has now been statistically at zero or negative growth for 18 quarters in a row.
• Meanwhile, Russian Manufacturing PMI rose from 51.2 in 2Q 2017 to 52.1 in 3Q 2017, marking fifth consecutive quarter of expansion in the sector (nominally) and fourth consecutive quarter of above 50.0 (statistically). With this, Russia is now back at the top of Manufacturing sector growth league amongst the BRIC economies. However, 3Q 2017 reading was weaker than 4Q 2016 and 1Q 2017, suggesting that the post-recession recovery is not gaining speed.
• China Manufacturing PMI rose in 3Q 2017 to 51.2 from zero growth of 50.1 in 2Q 2017. The dynamics are weaker than in Russia, but similar in pattern, with 3Q growth being anaemic. In general, since moving above 50.0 mark in 3Q 2016, China Manufacturing PMIs never once rose above 51.3 marker, indicating very weak growth conditions in the sector.
• India's Manufacturing PMI tanked again in 3Q 2017 falling to 50.1 (statistically - zero growth) from 51.7 in 2Q 2017. Most recent peak in Manufacturing activity in India was back in 3Q 2016 and 4Q 2016 at 52.2 and 52.1 and these highs have not been regained since then. India's economy continues to suffer from extremely poor macroeconomic policies adopted by the country in recent years, including botched tax reforms and horrendous experimentation with 'cashless society' ideas. 

Overall, BRIC Manufacturing Index (computed using my methodology on the basis of Markit data) has risen to 51.0 in 3Q 2017 on foot of improved performance in Russia and China, up from 50.6 in 2Q 2017 and virtually matching 51.1 reading in 1Q 2017. At 51.0, the index barely exceed statistical significance bound of 50.9. This runs against the Global Manufacturing PMI of 52.9 in 3Q 2017, 52.6 in 2Q 2017 and 52.9 in 1Q 2017. In simple terms, the last quarter was yet another (18th consecutive) of BRIC Manufacturing PMI falling below Global Manufacturing PMI, highlighting a simple fact that world's largest emerging and middle-income economies are no longer serving as an engine for global growth.

Stay tuned for Services PMIs analysis.

12/4/17: German Economy Forecasts 2017-2018

The latest joint economic forecast for German economy is out and, in line with what Eurocoin has been signalling recently (see post here), the forecast upgrades outlook for Euro area's largest economy.

Here's the release, with some commentary added: Germany's "aggregate production capacities are now likely to have slightly exceeded their normal utilisation levels. However, cyclical dynamics remain low compared to earlier periods of recoveries, as consumption expenditures, which do not exhibit strong fluctuations, have been the main driving force so far. In addition, net migration increases potential output, counteracting a stronger capacity tightening."

• German GDP) is expected to expand by 1.5% (1.8% adjusted for calendar effects) in 2017 and 1.8% in 2018
• Unemployment is expected to fall to 6.1% in 2016, to 5.7% in 2017 and 5.4% in 2018 
• "Inflation is expected to increase markedly over the forecast horizon. After an increase in consumer prices of only 0.5% in 2016, the inflation rate is expected to rise to 1.8% in 2017 and 1.7% in 2018". This would be consistent with the ECB starting to raise rates in late 2017 and continuing to hike into 2018. The forecast does not cover interest rates policy timing, but does state that "In the euro area, the institutes do not expect interest rates to rise during the forecast period. However, bond purchases are likely to be phased out next year." In my view, this position is not consistent with forecast inflation and growth dynamics.
• "The public budget surplus will reduce only modestly. Public finances are slightly stimulating economic activity in the current year and are cyclically neutral in the year ahead." In simple terms, Germany will run budget surpluses in both 2017 and 2018, with cumulative surpluses around EUR36.6 billion over these two years, against a cumulative surplus of EUR44.6 billion in 2015 and 2016.
• Current account surpluses are expected to remain above EUR250 billion per annum in 2017 and 2018, with cumulative current account surpluses for these two years forecast at EUR508 billion against EUR521 billion surpluses in 2015-2016.

Slight re-acceleration in both budgetary surplus and current account surplus over 2017-2018 will provide a very small amount of room for growth in imports and capital investment out of Germany to the rest of the euro area. 

10/4/17: BRIC Composite PMIs 1Q 17: Not Keeping Up With Global Growth

In two previous posts, I have covered the 1Q 2017 data for Manufacturing PMIs and Services PMIs for BRIC economies. Both indicators provided little hope that world's largest emerging economies are generating a positive growth momentum consistent with stronger global economic growth.

The same is confirmed by the Composite PMIs:

Brazil's 1Q 2017 Composite PMI came in at 46.7, up on 46.1 in 4Q 2016, but still below the stagnation line. In simple terms, Brazil's Composite PMIs have now signalled negative growth for 12 consecutive quarters. Improved 1Q 2017 reading is consistent with continued and strong contraction in the economy, albeit a contraction that is less pronounced than in previous quarters.

Russia's Composite PMI posted a reading of 56.7, marking the strongest growth performance for the economy since 4Q 2006. Predictably, given both Manufacturing and Services PMIs as discussed in above-linked posts, Russian economy has outperformed in 1Q 2017 global economic growth momentum and is currently the strongest BRIC economy for the fourth consecutive quarter.

India's Composite PMI came in at 50.8, up marginally on 50.7 in 4Q 2016. This marks the second consecutive quarter of Composite PMI readings for India that are statistically indistinguishable from the stagnation line of 50.0. There is little good news in the data from India, where the fallout from the disastrous de-monetisation campaign by the government has been taking its toll.

Chinese Composite PMI stood at 52.3 in 1Q 2017, down from 53.1, but still the second highest since 1Q 2013. In simple terms, this means that the Chinese economic growth is not accelerating off 4Q 2016 dynamics, suggesting that the economy has now exhausted any momentum gained on foot of a massive credit bubble expansion in modern history.

Chart below illustrates the dynamics:

As shown above, Russia is the only BRIC economy currently generating upward supports for global growth.

When we consider individual sectoral indices, as shown in the chart below, BRIC Manufacturing sector is now pushing global growth momentum down, while BRIC Services sector is co-moving with the global growth, but provides no positive momentum to global economic expansion:

Finally, using monthly data (100=zero growth) for the BRIC economies index of economic activity (computed by me based on Markit and IMF data), the chart below shows just to what extent does Russian growth momentum dominates rest of the BRIC economies dynamics:

In summary, BRIC economies remain negative contributors to the global economic growth, with BRIC economies posting overall positive, but weak growth across the two key sectors.

10/4/17: BRIC Services PMI 1Q 2017: Another Weak Quarter

Yesterday, in my analysis of BRIC Manufacturing PMIs for 1Q 2017, I showed that 51.1 for 1Q 2017, BRIC Manufacturing PMI average came down marginally on 51.2 in 4Q 2016, although up on 49.2 reading for 1Q 2016. Russia was the only economy posting Q1 2017 Manufacturing activity in line with Global Manufacturing dynamics and BRIC as a group were exerting downward pressure on global manufacturing sector.

The news, therefore, were not great for the global manufacturing economy (stalled growth momentum in 1Q 2017), and for the BRIC economies.

Looking at Services PMIs next:

Brazil's Services PMI for 1Q 2017 averaged at 46.4, which is somewhat better than 44.5 average for 3Q 2016 and 4Q 2016 and stronger than 40.0 average for 1Q 2016. In simple terms, Brazil's Services activity continued to shrink and shrink rapidly in 1Q 2017, although the rate of contraction moderated. All in, Brazil's Services PMIs have now been in sub-50 territory for 10 consecutive quarters, two quarters shorter than Brazil's Manufacturing sector. The long-running and deep recession in Latin America's largest economy is continuing, although there are some very fragile signs that it might come to an end in the foreseeable future, as both Manufacturing PMI (at 49.6 in March) and Services PMI (at 47.7 in March) are showing signs of recovery.

Russia Services PMI for 1Q 2017 came in at a blistering pace of 56.8, up on already significant growth in 4Q 2016 at 54.6 and significantly above 1Q 2016 reading of 50.0. All in, this is the fourth consecutive quarter of Services PMIs above 50.0, with all four quarters reading statistically significant for positive growth. Russia is leading BRIC contribution to global growth in both Manufacturing and Services sectors, judging by PMIs.

Indian Services PMI was at 50.2 in 1Q 2017, which not statistically distinct from zero growth marker of 50.0, but up on 49.3 in 4Q 2016. In 1Q 2016 the Services PMI averaged 53.6 which was positive for growth. Indian economy has been hitting some trouble waters for the last two quarters, something I remarked upon in the post covering Manufacturing PMIs linked above. While Services are showing signs of stabilisation, the recovery is not yet evident in the data and is lagging Manufacturing sector performance.

China's Services PMI reading in 1Q 2017 disappointed those who hoped that 2016 credit explosion would set stage for a robust economic growth recovery. With Manufacturing PMI growth signal stuck at the same level in 1Q 2017 as in 4Q 2016, Services PMI reading for 1Q 2017 was actually below the 4Q 2016 reading (52.6 vs 53.0). Given that the index never once slipped below 50 in the history of the series, as well as given the moments of the underlying distribution, 52.6 reading is statistically indistinguishable from zero growth conditions. Thus, although posting the second strongest, amongst the BRIC economies, PMI reading for 1Q 2017 after Russia, Chinese Services sector was a relative negative for global growth momentum.

Chart and table below summarise some of the dynamics discussed earlier:

In summary, as shown above, global PMIs are supported to the upside only by Russian Services PMI dynamics, with Chinese Services PMIs providing virtually no momentum to global Growth, and both India and Brazil contributing negatively. Overall, thus, BRIC economies remain weak and under-perform global growth.

24/2/2017: Baltic Dry Index is Still in a Disaster Territory

All of the discussions about the Baltic Dry Index - a proxy for global trade flows - in recent weeks was centred on the alleged recovery in the index valuations from the historical lows of 1Q 2016. Much of this recovery was predicated on the cost of fuel that went to inflate the cost of shipping, rather than the genuine uptick in global trade.

In fact, as the most recent data suggests, uptick in global trade volumes is nowhere to be seen:

Source: https://www.fxstreet.com/analysis/global-trade-disaster-nearly-certain-201702220646

But here is a look at the trends in the Baltic Dry Index confirming the simple fact that whatever recovery there has been, the index readings remain deeply in a trade-recession territory:

Worse, Suez Canal traffic is still trending down: http://www.hellenicshippingnews.com/suez-canal-revenues-decline-in-wake-of-sluggish-global-trade/, although Panama Canal volumes are hitting new records http://www.tradewindsnews.com/andalso/1213246/panama-canal-volumes-hit-new-record (the data is not adjusted for the capacity expansion since June 2016). Even with that expansion, Trans-pacific trade is up only 4.3% y/y in 2016, an improvement on 3.7% growth in 2015, but much worse than 5.9% growth in 2014 (see http://www.hellenicshippingnews.com/volume-recovery-in-far-east-europe-and-transpacific-trade/).

Overall, even the improved Baltic Dry Index current average for 2017-to-date is at around 831.6, which is below all 2009-2014 annual averages. Not exactly a sign of booming global economy.

8/2/17: BRIC Composite PMIs: Russia Sustains Growth Momentum in January

Having covered January PMIs for BRIC economies for manufacturing sector (http://trueeconomics.blogspot.com/2017/02/2217-bric-manufacturing-pmis-russia.html) and for services sector (http://trueeconomics.blogspot.com/2017/02/2217-bric-manufacturing-pmis-russia.html), let’s update data for Composite PMI indicator.


Overall, only one BRIC economy - Russia - provided solid support to global growth in January, with China providing a slight downward momentum and India and Brazil leading to a significant downside momentum.

Brazil’s Composite PMI continued to signal severe contraction at 44.7 in January, tanking deeper into a recessionary territory compared to December 2016 reading of 45.2. This makes 23rd consecutive month of contraction. Brazil registered recessionary PMIs in both Services and Manufacturing and in both sectors, January readings were no better than December. In simple terms, there is no light in the end of Brazil’s recessionary tunnel, yet.

Russia Composite PMI posted a robust upward improvement, rising from an already fast-paced 56.6 in December 2016 to 58.3 in January 2017, marking 12th consecutive month of above 50 readings and the highest Composite PMI level on record. Impressively, both Services and Manufacturing sectors PMIs rose in January, compared to December.

Chinese Composite PMI posted a significant slowdown in growth from 53.5 in December 2016 to 52.2 in January. Still, the index remains above 50 mark for 11th month in a row. Chinese Manufacturing PMI declined substantially in January, while Services posted a very modest drop. Importantly, Chinese Manufacturing PMI has now dropped below statistically significant above-50 reading, after just one month at the level close enough to being almost statistically significant.

Third month of sub-50 readings in Services PMI and anaemic 50.4 reading in manufacturing meant that India’s Composite PMI remained below 50.0 marker for the third consecutive month, posting 49.4 in January compared to 47.6 in December. Despite index improvement (signalling slower rate of economic activity contraction), Indian economy remains in recessionary dynamics, courtesy of the completely botched self-inflicted policy mayhem - the misguided demonetisation.

Table below summarises the most recent movements in Composite PMIs

Chart below shows Composite PMIs for BRICs (quarterly basis) against the Global Composite PMI, showing that the current global growth trend is still being supported by the BRICs, with primary positive impact coming from Russian figures.

The following chart summaries the sheer magnitude of Russian growth momentum compared to BRICs-ex-Russia:

However, the good news is that despite slippage in India and extreme weakness in Brazil, overall BRIC’s contribution to global growth continues to trend upward, albeit with some significant moderation since mid-4Q 2016:

7/2/17: BRIC Services PMIs: Supporting Global Growth

BRIC Services PMIs for January signal continued expansion on world’s largest emerging economies.

Brazil Services PMI remained at a disappointing 45.1 in January, same as in December 2016, implying relatively steep rate of economic contraction in the sector. This marks 23rd consecutive month of sub-50 readings for the indicator, almost on par with 24 months-long sub-50 readings run for Manufacturing. Current 3mo moving average for Services PMI is at 44.9, marginally up on 44.0 3mo average for the previous period and on 44.5 3mo average through January 2016. Current 3mo average for Services is in line with the 45.1 3mo average for Manufacturing. Both sectors are signalling continued steep decline in the economy battered by 2 years of recessionary dynamics and no signs of a light at the end of that tunnel.

In contrast to Brazil, Russia Services PMI posted another steep acceleration in growth, rising from 56.5 in December 2016 to 58.4 in January 2017, the highest reading in 102 months. As a reminder, Russia’s Manufacturing PMI reached 70-months high in January at 54.7. Russian services sector now posted 12 consecutive months of above 50 readings, implying that Russian recession is now over (with Manufacturing PMI reading above 50 for 6 months in a row). 3mo moving average through January is at blistering 56.5, up on already solid 3mo previous at 53.1 and significantly up on 48.2 3mo average through January 2016.

Chinese Services PMI posted a slight moderation in growth from 53.4 in December 2016 to 53.1 in January, with current 3mo average at 53.2, up on 52.2 average for the previous 3 months’ period and on 51.3 3mo average through January 2016. Chinese Services PMI has never registered a sub-50 reading in its history.

India Services sector PMI continued to post sub-50 readings for the third month in a row, coming in at 48.7 in January, compared to 46.8 in December. On a 3mo average basis, January reading is at 47.4, which stands in sharp contrast to the sector fortunes in the previous 3 months period (53.7 average) and compared to January 2016 3mo average at 52.7.

Table below summaries both Manufacturing and Services PMIs for the BRICs:

Chart below shows dynamics in monthly Services PMIs

While the second chart shows current 1Q 2017 performance in quarterly data context.

Key point of the above chart is the strong co-movement between Global PMI and the Russian and Chinese PMIs for the sector. As I noted back in September, this is a strongly positive sign of global economy gaining some much needed growth momentum.

Clearly, Russia leads growth momentum within BRICs, with China providing supporting uplift. India and Brazil act as major drags on global growth across the Services sector.

Note: I covered BRIC Manufacturing PMIs in an earlier post here: http://trueeconomics.blogspot.com/2017/02/2217-bric-manufacturing-pmis-russia.html.

27/1/17: Eurocoin Signals Accelerating Growth in January

Eurocoin, leading growth indicator for euro area growth published by Banca d'Italia and CEPR has risen to 0.69 in January 2017 from 0.59 in December 2016, signalling stronger growth conditions in the common currency block. This is the strongest reading for the indicator since March 2010 and comes on foot of some firming up in inflation.

Two charts to illustrate the trends:

Eurocoin has been signalling statistically positive growth since March 2015 and has been exhibiting strong upward trend since the start of 2Q 2016. The latest rise in the indicator was down to improved consumer and business confidence, as well as higher inflationary pressures. Although un-mentioned by CEPR, higher stock markets valuations also helped.

5/1/17: Global Growth Upside: More BRICs, less B

Back at the end of 3Q 2016, I contributed a chart to +Business Insider feature covering most important trends that analysts' keep an eye over. You can see the chart here: http://trueeconomics.blogspot.com/2016/09/22916-most-important-charts-in-world.html.

The key to global growth, in my opinion, will be recovery led by the emerging markets, and in particular - by world's largest emerging economies, the BRICs.

That was then, and this is now:

Observe the global growth trend implied by 4Q Composite PMIs:

1. We have a second quarter uptick in global growth. What was fragile bounce back from the 2Q 2016 low of 51.1 to 3Q 2016 reading of 51.7 is now a robust push up in growth terms to 4Q 2016 reading of 53.4 - the strongest growth signal since 3Q 2015. 
2. Two of the BRICs economies: Russia (4Q composite PMI average at 55.4) and China (4Q 2016 composite PMI average of 53.1) are leading the above trend.
3. India is on a surprise downside, most likely attributable to series of policy errors (including demonetization), which (for now) is not yet a new trend to the downside. Should Indian economy get back to its 'normal' running order, BRICs contribution to global growth will pick up and global PMIs will be supported even further to the upside.
4. Brazil, however, is a long term worry. Latin America's largest economy is in deep trouble, dragging down both BRIC growth prospects and the strength of the overall emerging markets growth.

What are the headwinds to watch?

1. China is the obvious one. Current level of activity, including that signalled by the PMIs, is simply too exposed to monetary and fiscal stimuli, and, thus, highly risky. 
2. Russia is another concern. Russian recovery from the recession is still fragile and requires continued confirmation, especially in Manufacturing sector. On the brighter side: improving commodities prices, and better prospects for monetary easing (due to significant decline in inflation pressures) are offering some hope forward. On the darker horizon, however, political cycle (2018 Presidential election) and geopolitical climate (elevated risks vis-a-vis Russian relations with the West and ongoing geopolitical rebalancing in Central Asia, Asia-Pacific, Eastern Europe and Middle East) present higher risks to the downside to growth.
3. Brazil is simply a basket case that will have to go through a painful process of structural deleveraging and political re-balancing. However, as the rate of contraction in Brazil's economy moderates over time, BRIC's growth momentum will also improve as a group.

So keep a closer eye on those PMIs coming in 1Q 2017.

4/1/17: BRIC Services PMIs: 4Q & FY 2016

I posted my analysis of BRIC quarterly Manufacturing PMIs here: http://trueeconomics.blogspot.com/2017/01/4117-bric-manufacturing-pmi-4q-2016-and.html.

Now, let’s look at Services sector. Table below summaries latest data

Brazil Services PMI for 4Q 2016 came in at 44.5, unchanged on 3Q 2016 and marking rapid rate of contraction in the country’s Services economy. This is 9th consecutive quarter of sub-50 readings, and 12th consecutive quarter of PMI readings statistically at or below 50.0 mark. Services recession continues to be worse than Manufacturing recession for the seventh quarter in a row.

Russian Services PMI ended 2016 with a bang. 4Q 2016 reading averaged 54.6, up on 3Q reading of 53.8. FY 2016 average is solid 52.9, which is a big contrast to 48.5 FY average for 2015. This is the strongest rate of quarterly average growth since 1Q 2013. Overall, dynamics in the Services sector support the view that Russian Services economy has now moved solidly out of the recession and into broad expansion. To translate this into overall economic outlook for growth, however, we need at least one (preferably two) quarters of above 52 readings in Manufacturing.

Chinese Services PMI also gained strength in 4Q 2016, ending the last quarter at an average of 53.0, up on 3Q 2016 reading of 51.9. FY 2016 average reading for the sector is robust 52.2 which is marginally better than 52.0 average for the the FY 2015.

India Services posted a surprising rapid contraction, falling for 4Q 2016 to 49.3 from 52.9 average for 3Q 2016. This marks the first sub-50 reading since 2Q 2015 and is hard to interpret as anything but a volatility induced by monetary reforms and a couple of other policy blunders. Still, 2016 FY average for the sector is at 51.8 which is virtually unchanged compared to 51.7 average for FY 2015.

Looking at the trends:

1) Russian rate of Services sector growth is now on par with pre-crisis period (2013 and earlier). China is taking second place in terms of Services growth momentum, albeit its expansion is both weaker than Russian, and sustained by superficial means (monetary and fiscal stimuli - not present in Russia).

2) India is on a sharp volatility down, which needs to be confirmed if we are to talk about general weaknesses in the economy.

3) Brazil remains the sickest of all BRICS, confirming the same positioning in country Manufacturing.

4) Again, tracing out longer term trends, Russian general slowdown set on around 2Q 2013 in Services has now been broken to the upside. While Chinese Services continue to trend along shallow growth line, and India’s trend (highly volatile) is suggesting some weaknesses in growth. Brazil’s Services weaknesses (turned decline in 4Q 2014) that started around 4Q 2012 - 1Q 2013 is still pronounced.

11/6/16: Too Little CAPEX? Why, Even Investors are Catching Up

Much has been written about the lagging capex cycle in the global economy and its impact on global growth. Including on this blog. So here’s another nice chart, courtesy of BAML showing that investors currently hold extremely pessimistic view of the companies capex activities on aggregate:

“… and laugh again…” as Leonard Cohen proposed… 

25/5/16: Does the Global Trade Slowdown Matter?

The transition from the Global Financial Crisis, to the Great Recession and to currently fragile recovery has been marked not only by weaker structural growth across the economies and by massive outflows of funds from the emerging markets, but by a dramatic decline in world trade growth. Another stylised fact is that since the onset of the recovery, growth in global trade volumes has been also lagging behind growth in GDP terms.

This has been a puzzling phenomena, inconsistent with the previous recessions. Factually, global trade grew at or below 3 percent in 2012-15, which is below the pre-crisis average of 7 percent (over 1987-2007) and less than the growth of global GDP.

One recent paper (see full citation below) by Neagu, Mattoo and Ruta (2016) attempted to explain this transition to the new global growth environment of relatively subdued global trade growth. Here is a quick summary of their paper.

As chart above shows, there has been a major slowdown in growth in world trade volumes. Per Neagu, Mattoo and Ruta (2016), “proximate explanations of the trade slowdown link it to changes in GDP and, hence, to the fallout of the Global Financial Crisis. While weak global demand matters for trade growth as it depresses world import demand, cyclical factors are not the only determinants of the trade slowdown.”

In simple terms, trade is growing slower than GDP not only because GDP growth is slow itself, but “also because the long-run relationship between trade and GDP is changing. The elasticity of world trade to GDP was larger than 2 in the 1990s and declined throughout the 2000s.” So in simple terms, a 1% change in world GDP used to be associated with 2% change in world trade volumes. It no longer is.

“Among the leading causes of this structural change in the trade-income relationship is a shift in vertical specialization. The long-run trade elasticity increased during the 1990s, as production fragmented internationally into global value chains (GVCs), and decreased in the 2000s as this process decelerated.” In other words, logistic revolution of the 1990s is now over and the low-hanging fruit of improving cost margins on production outsourcing and enhancing delivery efficiencies has been picked, leaving little new momentum to drive growth in trade flows over each unit of increase in global income.

Per Neagu, Mattoo and Ruta (2016), “Economists disagree regarding the implications of the trade slowdown for economic growth (and welfare). Some believe that the slowing down of global trade has no real consequences for economic growth. For instance, commenting on the global trade slowdown, Paul Krugman noted that “The flattening out is neither good nor bad, it’s just what happens when a particular trend reaches its limits”. Others take the opposite view. For instance, in a speech as governor of the Central Bank of India, Raghuram Rajan concluded that “We are more dependent on the global economy than we think. That it is growing more slowly, and is more inward looking, than in the past means that we have to look to regional and domestic demand for our growth.”

According to the authors, “both views have elements of truth but neither may be completely right. On the one hand, the impact of the trade slowdown should not be overstated. Most economies are more open today than they were in the 1990s. In so far as openness per se is associated with dynamic benefits, trade will continue to foster growth. On the other hand, there is a risk of understating the implications of the trade slowdown. If the expansion of trade growth in the 1990s contributed to countries’ economic growth, one may suspect that the flattening of this trend will imply that the contribution of trade to the growth process will be lower.”

So, in summary, then: “Trade is growing more slowly not only because growth of global gross domestic product is lower, but also because trade itself has become less responsive to gross domestic product.”

Neagu, Mattoo and Ruta (2016) go on “to try to investigate the economic consequences of the recent trade slowdown.” The authors focus “…on two channels through which the changing trade-income relationship documented in the literature may affect countries’ economic performance.” These are:

1. “The demand-side Keynesian concern is that sluggish world import growth may adversely affect individual countries’ economic growth as it limits opportunities for their exports.”
2. “The supply side (Adam) Smithian concern is that slower trade may diminish the scope for productivity growth through increasing specialization and diffusion of technologies. In particular, a slower pace of GVC expansion may imply diminishing scope for productivity growth through a more efficient international division of labor and knowledge spillovers.”

So what do they find?

Firstly, “preliminary evidence is mixed”:

• “On the demand side, we find that the elasticity of exports to global demand has decreased for both high-income and developing economies in the 2000s relative to the 1990s.”
• “We also find that the sensitivity of domestic growth to export growth is higher, and has increased more over time, for developing economies compared to high-income economies.”
• Both of “these results, however, hold only when we measure exports in traditional gross terms.”
• “When we use value added exports, which are more relevant for the demand-side mechanism, the change in estimated elasticities is smaller and not statistically significant (although a qualification is that value added trade data are available for a shorter period and fewer countries).”

Secondly, the authors “…try to assess the Smithian concern by focusing on the growth implication of a slowing pace of GVC growth”:

• “…estimates indicate that increasing backward specialization has a positive impact on labor productivity growth…” 
• Quantifying “the growth in labor productivity due to the growth in backward vertical specialization”, the authors find that “while this share is not large, as productivity growth is explained by many factors beyond vertical specialization, its contribution has decreased by half in recent years, suggesting that the trade slowdown is a contributing factor of the decrease in productivity growth.”

In the above, note the change from blue lines (positive link between the degree of vertical specialization and productivity growth) to red lines (negative link).

In short, things are pretty bad: both factors - demand slowdown and trade slowdown - are cross-related and linked. Both are reinforcing each other, yielding growth slowdown across both supply side and demand side margins. And the side effect is: the two effects being correlated also at least in part captures productivity slowdown - aka, secular stagnation dimension.



Neagu, Cristina and Mattoo, Aaditya and Ruta, Michele, "Does the Global Trade Slowdown Matter?" (May 13, 2016). World Bank Policy Research Working Paper No. 7673. Available at SSRN: http://ssrn.com/abstract=2779830

12/4/16: Look, Ma... It's [not] Working: IMF & the R-word

A handy chart from the IMF highlighting changes over the last 12 months in forecast probability of recession 12mo forward across the global economy

Yes, things are getting boomier... as every major region, save Asia and ROW are experiencing higher probability of recession today than in both October 2015 and April 2015, and as probability of a recession in 2016 is now above 30 percent for the Euro area and above 40 percent for Japan.

In that 'repaired' world of Central Banks' activism (described here: http://trueeconomics.blogspot.com/2016/04/12416-imf-rip-growth-update-risks.html) we can only dream of more assets purchases and more government debt monetizing, and more public investment on things we all can't live without...

Because, look, it's working:

12/4/16: IMF (RIP) Growth Update: Risks Realism, Policy Idiocy

IMF WORLD ECONOMIC OUTLOOK update out today (we don’t yet have full data set update).

Top line forecasts published confirm what we already knew: global economic growth is going nowhere, fast.  Actually, faster than 3 months ago.

Run through top figures:

• Global growth: In October 2015 (last full data update we had), the forecast for 2016-2017 was 3.6 percent and 3.8 percent. Now, it is 3.2 percent and 3.5 percent. Cumulated loss (over 2016-2017) of 0.725 percentage points in world GDP within a span 6 months.
• Advanced Economies growth: October 2015 forecast was for 2.2% in 2016 and 2.2% in 2017. Now: 1.9% and 2.0%. Cumulated loss of 0.51 percentage points in 6 months
• U.S.: October 2015 outlook estimated 2016-2017 annual rate of growth at 2.8 percent. April 2016 forecast is 2.4% and 2.5% respectively, for a cumulative two-years loss in growth terms of 0.72 percentage points
• Euro area: the comatose of growth were supposed to eek out GDP expansion of 1.6 and 1.7 percent in 2016-2017 under October 2015 forecast. April 2016 forecast suggests growth is expected to be 1.5% and 1.6%. The region remains the weakest advanced economy after Japan
• Japan is now completely, officially dead-zone for growth. In October 2015, IMF was forecasting growth of 1% in 2016 and 0.4% in 2017. That was bad? Now the forecast is for 0.5% and -0.1% respectively. Cumulated loss in Japan’s real GDP over 2016-2017 is 1.005 percentage points.
• Brazil: Following 3.8 contraction in 2015 is now expected to produce another 3.8 contraction in real GDP in 2016 before returning to 0.00 percent growth in 2017. Contrast this with October WEO forecast for 2016 growth at -1% and 2017 forecast for growth of +2.3% and you have two-years cumulated loss in real GDP of a whooping 5.08 percentage points.
• Russia: projections for 2016-2017 growth published in October 2015 were at -0.6% and 1% respectively. New projections are -1.8% and +0.8%, implying a cumulative loss in real GDP outlook for 2016-2017 of 1.41 percentage points.
• India: The only country covered by today’s update with no revisions to October 2015 forecasts. IMF still expects the country economy to expand 7.5% per annum in both 2016 and 2017
• China: China is the only country with an upgrade for forecasts for both 2016 and 2017 compared to both January 2016 and October 2016 IMF releases. Chinese economy is now forecast to grow 6.5% and 6.2% in 2016 and 2017, compared to October 2015 forecast of 6.3% and 6.0%.

Beyond growth forecasts, IMF also revised its forecasts for World Trade Volumes. In October 2015, the Fund projected World Growth to expand at 4.1% and 4.6% y/y in 2016 and 2017. April 2016 update sees this growth falling to 3.1% and 3.8%, respectively. And this is without accounting for poor prices performance.

In short, World economy’s trip through the Deadville (that started around 2011) is running swimmingly:

Meanwhile, as IMF notes, “financial risks prominent, together with geopolitical shocks, political discord”. In other words,we are one shock away from a disaster.

IMF response to this is: "The current diminished outlook calls for an immediate, proactive response… To support global growth, …there is a need for a more potent policy mix—a three-pronged policy approach based on structural, fiscal, and monetary policies.” In other words, what IMF thinks the world needs is:

1. More private & financial debt shoved into the system via Central Banks
2. More deficit spending to boost Government debt levels for the sake of ‘jobs creation’, and
3. More tax ‘rebalancing’ to make sure you don’t feel too wealthy from (1) and (2) above, whilst those who do get wealthy from (1) and (2) - aka banks, institutional investors, crony state-connected contractors - can continue to enjoy tax holidays.

In addition, of course, the fabled IMF ‘structural reforms’ are supposed to benefit the World Economy by making sure that labour income does not get any growth any time soon. Because, you know, someone (labour earners) has to suffer if someone (banks & investment markets) were to party a bit harder… for sustainability sake.

IMF grafts this idiocy of an advice onto partially realistic analysis of underlying risks to global growth:

• “The recovery is hampered by weak demand, partly held down by unresolved crisis legacies, as well as unfavorable demographics and low productivity growth. In the United States, ..domestic demand will be supported by strengthening balance sheets, no further fiscal drag, and an improving housing market. These forces are expected to offset the drag to net exports coming from a strong dollar and weaker manufacturing.” One wonders if the IMF noticed rising debt levels in households (car loans, student loans) or U.S. corporates, or indeed the U.S. Government debt dynamics
• “In the euro area, low investment, high unemployment, and weak balance sheets weigh on growth…” You can’t but wonder if the IMF actually is capable of seeing households of Europe as still being somewhat economically alive.

But the Fund does see incoming risks rising: “In the current environment of weak growth, risks to the outlook are now more pronounced. These include:

• A return of financial turmoil, impairing confidence. For instance, an additional bout of exchange rate depreciations in emerging economies could further worsen corporate balance sheets, and a sharp decline in capital inflows could force a rapid compression of domestic demand. [Note: nothing about Western Banks being effectively zombified by capital requirements uncertainty, corporate over-leveraging, still weighted down by poor quality assets, etc]
• A sharper slowdown in China than currently projected could have strong international spillovers through trade, commodity prices, and confidence, and lead to a more generalized slowdown in the global economy. 
• Shocks of a noneconomic origin—related to geopolitical conflicts, political discord, terrorism, refugee flows, or global epidemics—loom over some countries and regions and, if left unchecked, could have significant spillovers on global economic activity.”

The key point, however, is that with currently excessively leveraged Central Banks’ balance sheets and with interest rates being effectively at zero, any of the above (and other, unmentioned by the IMF) shocks can derail the entire wedding of the ugly groom with an unsightly bride that politicians around the world call ‘the ongoing recovery’. And that point is only a sub-text to the IMF latest update. It should have been the front page of it.

So before anyone noticed, almost a 1,000 rate cuts around the world later, and roughly USD20 trillion in various asset purchasing programmes around the globe, trillions in bad assets work-outs and tens of trillions in Government and corporate debt uplifts, we are still where we were: at a point of system fragility being so acute, even the half-blind moles of IMF spotting the shine of the incoming train.

3/3/16: China Services & Composite PMI: February

China Services PMI fell to 51.2 in February, from January’s six-month high of 52.4, pointing to a much slower rate of growth than the historical series average of 55.0. This comes on foot of Manufacturing PMI registering an outright contraction in February, with the rate of reduction quickening to the steepest since September 2015 (details here: http://trueeconomics.blogspot.com/2016/03/2316-bric-manufacturing-pmi-february.html).

Services PMI 3mo average through February was 51.3, which is basically flat on 51.2 recored in 3mo period through November 2015 and lower than 3mo average through February 2015 (52.4).

Per Markit: “New business growth also slowed across the service sector in February after a solid rise at the start of the year. Furthermore, the latest increase in new orders was weaker than the long-run trend and only modest, with some panellists commenting on relatively subdued client demand. New orders continued to decline at manufacturing companies, and at a slightly quicker rate than at the start of 2016.”

After posting a weak stabilisation in January (at 50.1), the Composite PMI fell to a recessionary level of 49.4 in February, indicating “a renewed fall in total Chinese business activity in February… to signal a marginal rate of contraction.”
 On a 3mo basis, 3mo average through February 2016 was at 49.7, up on 3mo average through November 2015 (49.5) and down on 3mo average through February 2015 (51.2). Again, last six months we saw averages well below historical average (52.9).

Per Markit, “slower increases in both activity and new orders contributed to a weaker expansion of service sector staff numbers in February. Companies that reported higher staff numbers generally mentioned hiring new employees in line with new order growth. Job shedding meanwhile intensified across the manufacturing sector in February, with the latest decline in workforce numbers the sharpest since January 2009. As a result, composite employment fell at a rate that, though modest, was the quickest in six months.”

This clearly signals that troubles are not over for Chinese economy and also suggests that currently projected rates of growth for the world’s second largest economy are way off the mark. Composite PMIs have now posted sub-zero growth signals in five out of the last seven months, with one other month reading being basically consistent with zero growth. On a Composite indicator basis, China is now the second weakest economy in the BRIC group after Brazil, with Russia overtaking itm having posted a composite index reading of 50.6 in February. Over the last 12 months, the same situation prevailed in July-September 2015, and in November 2015 the two countries were tied for the second worst performance reading.

3/3/16: Russia Services & Composite PMI: February

Russian Services PMI came in with surprising upside that bucked the trend in Manufacturing (see links here: http://trueeconomics.blogspot.com/2016/03/2316-bric-manufacturing-pmi-february.html), posting 50.9 reading in February, up from 47.1 in January. On a 3mo basis, however, 3mo average through February remains below 50.0 expansion line at 48.6, which is actually poorer than 49.6 3mo average through November 2015, although much better than 43.7 3mo average through February 2015. In simple terms, February uptick in growth in Services is fragile, unconfirmed, and at this stage does not constitute a robust signal of economic stabilisation.

Per Markit: “Russian service providers reported a slight increase in their business activity levels during February, driven by an expansion in new orders. However, a rise in new projects could not prevent a further sharp deterioration in outstanding business in the sector. Meanwhile, job cuts were evident while price pressures continued to persist.” Still, “the latest increase ends a four month sequence of contraction. Panel members partly linked rising output to an increase in new export orders, the result of a depreciating rouble.”

Net summary is: February reading for Services is encouraging, but is not yet consistent with sustained stabilisation in the economy. 

This has been confirmed by the Russia’s Composite Output Index which also returned to expansion territory in February for the first time in three months. Per Markit: “however at 50.6, up from January’s 48.4, the latest upturn was relatively weak.” On a 3mo basis, the Composite index is still below 50 at 49.0, which is lower than Composite Index average for the 3 months through November 2015 (50.2) although strongly ahead of the abysmal reading for the 3mo period through February 2015 (46.2).

“A higher level of new business was reported by Russian service providers during February, the first increase in five months. However, the pace of
growth was relatively weak. Anecdotal evidence suggested that the expansion reflected the introduction of new products across the sector. Meanwhile, a slight rise in volumes of new orders were reported by manufacturers this month.”

Again, on the net, Composite PMI figures show the return to growth to be unconvincing at this stage. We will need at least 3 consecutive months of above 50 readings to make any serious judgement as to the reversal of recessionary dynamics in Russian economy.

2/3/16: BRIC Manufacturing PMI: February

BRIC manufacturing sector conditions have posted major deterioration in February 2016 compared to January, marking another ugly month for world’s largest emerging economies.

Russian Manufacturing PMI for February posted a rather unsurprising and relatively mild deterioration from already marginally-recessionary reading in January. Details are covered here: http://trueeconomics.blogspot.com/2016/03/2316-russia-manufacturing-pmi-february.html.

Chinese Manufacturing PMI continued to tank in February, with country Manufacturing sector remaining the weakest of all BRICs, save Brazil, every month since July 2015. The details are covered here: http://trueeconomics.blogspot.com/2016/03/2316-china-manufacturing-pmi-february.html.


Meanwhile, Brazil’s manufacturing recession “extended to February, with a further drop in incoming new work leading companies to lower production and cut jobs again. Such was the extent of the downturn that firms shed jobs at the second-fastest pace since April 2009,” per Markit.

Brazil’s Manufacturing PMI fell from an ugly 47.4 in January to a horrific 44.5 in February, marking 13th consecutive sub-50 reading. On a 3mo average basis, Brazil’s Manufacturing remained in a contraction (45.8) over the 3mo period through February 2016, just as it was in the contraction (44.0 average) in the 3mo period through November 2015. In 3mo period through February 2015, PMI averaged 50.2.

Per Markit: “Amid evidence of an increasingly fragile economy and a subsequent fall in demand, the level of new business received by Brazilian manufacturers decreased in February. Having accelerated to the fastest since November 2015, the pace of contraction was steep. As a consequence, companies scaled down output again. Production dipped at a sharp and accelerated rate.
Supported by the depreciating real, new foreign orders for Brazilian manufactured goods improved for the third straight month in February. That said, new business from abroad increased at a modest pace overall.”

All in, Brazil remains BRIC’s weakest economy in Manufacturing sector terms every month since February 2015.


As in previous months, India was the only BRIC economy with Manufacturing PMI reading above 50.0 marker. In February 2016, Indian Manufacturing PMI stood at 51.1, unchanged in January 2016. The positive impact of this, however, is weak, at 51.1 marks relatively low (by historical comparisons) growth in the Indian Manufacturing sector.

Per Markit: “Manufacturing business conditions in India continued to improve, with new orders, exports, output and purchasing activity all rising in February. However, a faster expansion in new business inflows failed to lift growth of output and workforce numbers were left broadly unchanged again. PMI
data also highlighted a weaker rise in costs and the first reduction in selling prices since September 2015… Reflecting sustained growth of new work, Indian manufacturers raised their production volumes in February. That said, the rate of expansion eased since January and was marginal overall.”

On a 3mo MA basis, Indian Manufacturing PMI averaged 50.4 in 3 months through February 2016, down on 50.7 average for the 3mo period through November 2015 and down massively on 52.9 3mo average through February 2015.

Overall, India remains the best performing economy in the BRIC group, even though its Manufacturing sector growth is now in slow growth mode since September 2015.

In summary, in February, BRIC group of world’s largest emerging markets economies has posted another deeply disappointing performance across the Manufacturing sector. This compounds adverse headwinds in these economies in January and signals strong possibility of the BRICs exerting a significant negative pressure on global growth.