5/12/18: BRIC PMIs for November: A Moderate Pick Up in Growth

BRIC PMIs are in, although I am still waiting for Global Composite PMI report to update quarterly series - so stay tuned for more later), and the first thing that is worth noting is that, based on monthly data:

1. Brazil growth momentum has accelerated somewhat, in November (103.2) compared to October (101.0), although both readings are consistent with weak growth (zero growth in my series is set at 100). November reading is the highest in 9 months, although statistically, it is comparable to growth recorded in March, April and October this year).
2. Russia growth momentum de-accelerated from 111.6 in October to 110 in November, although, again, statistically, the two numbers are not significantly different from each other. November was the second highest reading in nine months, and the third highest reading in 2018.
3. China growth has improved from 101.0 in October to 103.8 in November. Despite this, last two months remain the lowest since April this year. From statistical significance point of view, October reading was distinctly below November reading, but November reading was consistent with August-September.
4. India posted substantial rise in growth conditions, from already robust 106.0 in October to a 24-months high of 109.2. This reading is statistically above all other period readings, with exception of being tied with July 2018 level of 108.2.

Thus, overall, BRIC Composite growth indicator rose from 102.8 in October to 105.3 in November, the highest in 10 months. BRIC ex-Russia reading was at 105.4 in November, compared to 102.7 in October. November reading for ex-Russia BRIC growth indicator was also the highest since February 2013.

Couple of charts to illustrate monthly data trends:

While the chart above clearly shows that Russia supports BRIC block growth momentum to the upside, this effect is somewhat moderating due to both ex-Russia BRIC growth momentum rising and Russia growth momentum slowing slightly.

The chart below highlights BRIC estimated growth contribution to global growth momentum:

Overall, as the chart above shows, BRIC economies contribution to global growth momentum has accelerated in November, but remains bound-range within the longer-term trend of weaker BRIC growth for the last five and a half years.

As noted above, I will be posting more on BRIC growth dynamics signalled by the PMIs once we have Global Composite PMIs published by Markit. Stay tuned.

9/10/18: BRIC Composite PMIs 3Q 2018: A Tale of Growth Slowdown

Previous posts on 3Q 2018 PMIs have covered:

1. BRIC Manufacturing PMIs: http://trueeconomics.blogspot.com/2018/10/31018-global-pmis-tanked-in-3q-2018.html;
2. BRIC Services PMIs: http://trueeconomics.blogspot.com/2018/10/91018-bric-services-pmis-3q-2018-slower.html; and
3. Global Composite PMIs: http://trueeconomics.blogspot.com/2018/10/31018-global-pmis-tanked-in-3q-2018.html.

Now, let’s take a look at the BRIC Composite PMIs that combine Services and Manufacturing sectors growth signals. As Global Composite PMI signalled slowing growth momentum in the global economy, BRIC Composite PMIs all trailed global growth indicator.

Brazil Composite PMI fell deeper into contraction territory in 3Q 2018 (48.5) compared to 2Q 2018 (49.1), marking the fourth consecutive quarter of contraction in the economy, as signalled by the combination of PMI indices in Services and Manufacturing sectors. 3Q 2018 was the lowest Composite PMI reading for the South America’s largest economy in 6 consecutive quarters.

Russia Composite PMI slipped from 53.4 in 2Q 2018 to 52.4 in 3Q 2018, marking slowdown in the rate of economic expansion. This was the lowest reading in Russia Composite PMIs since 2Q 2016. Despite this, Russia Composite PMI was the second largest in the BRIC group (marginally below India’s 52.5 reading).

China Composite PMI posted a modest decline in the growth rate falling from 52.5 in 2Q 2018 to 52.1 in 3Q 2018, the latter reading marking the lowest rate of expansion in 3 quarters. In fact, China Composite PMIs have been singling weak growth dynamics in every quarter since 4Q 2016 - something that is yet to be reflected in the official growth figures for the country.

India Composite PMI bucked the BRIC trend and rose from 51.9 in 2Q 2018 to 52.5 in 3Q 2018, for the first statistically significant growth signal in 5 quarters. Despite this, growth momentum in India remains below global PMI levels.

Global Composite PMI declined from 54.0 in 2Q 2018 to 53.3 in 3Q 2018.

Overall, slowing global growth momentum is being matched by a slowdown in the BRIC economies. Both Manufacturing and Services sectors of the BRIC economies are underperforming their Global counterparts and the overall trend is toward declining global and BRIC growth.

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.

5/1/17: BRIC Composite PMIs: 4Q 2016 & 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 and BRIC quarterly Services PMIs here: http://trueeconomics.blogspot.com/2017/01/4117-bric-services-pmis-4q-fy-2016.html.


Now, let’s look at Q4 2016 and FY 2016 Composite PMIs for BRIC economies.

For the first time since 1Q 2013, both services and manufacturing sectors of the BRIC economies are now in a stistcically significant expansion, as shown in the Chart below and summarised in the table that follows:

Composite PMIs as follows:

Brazil remains key underperformed, posting a worsening recession reading of 45.1 in 4Q 2016 compared to 3Q 2016. This was still and improvement on 41.6 reading in 4Q 2015. Despite this, across FY 2016, Composite PMI for the Brazilian economy averaged just 43.1, which is worse than 45.2 reading for the FY 2015 and 49.8 reading for the FY 2014. Brazil’s Composite PMI is now in 11 consecutive quarters of sub-50 readings (12 consecutive quarters of zero or negative growth, if we control for statistical significance).

Russia has posted a third consecutive quarter of growth, with accelerating positive dynamics. In 4Q 2016, Russian Composite PMI run at a blistering pace of 55.4, up on 53.2 in 3Q 2016 and 52.0 in 2Q 2016. This is the fastest pace of expansion since 2@ 2008. As the result, FY 2016 Composite PMI for the Russian economy came in at 52.6, signalling relatively robust rate of growth - the fastest pace of growth for FY 2016 for any BRIC economy. In 2015, FY reading was 48.8 (second worst in the BRIC group) and in 2014 it was 48.9 (the worst performance in the BRIC group). Based on three consecutive quarters of above 50 (statistically significant) PMIs, we can now call the end of the Russian recession, although risks of a reversal to the downside still remain, primarily due to lags in recovery in manufacturing sector.

Chinese Composite PMI came in at 53.1 in 4Q 2016, up on 51.7 in 3Q 2016 and marking the highest reading for any quarter since 4Q 2010. The expansion has now been sustained over 4 consecutive quarters, albeit once we adjust for statistical significance, growth in Chinese economy as measured by the Composite PMIs is only two quarters deep. FY 2016 reading is now at 51.4 - third fastest in the BRIC grouping, and an improvement on 2015 FY reading of 50.3. FT 2016 result posted higher rate of growth than in 2013-2015.

Indian Composite PMI came in at 50.7 - a sharp slowdown from 53.1 in 3Q 2016. The PMI reading is now statistically indistinguishable from 50.0 - the first time this happened since 2Q 2015. FY 2016 average Composite PMI for the Indian economy came in at 52.1, the second fastest pace of growth in the BRIC economies group and an improvement on 51.7 in 2015. The pace of growth signalled by the Composite PMIs in 2016 was the fastest over the last 4 years.

Chart below illustrates trends in quarterly Composite PMIs

Key take aways:

1) Russian Composite PMI is now signalling rates of growth consistent with pre-2H 2008 data. If trend to the upside is confirmed, Russian economic recovery will be not only sustained, but robust. Last two quarters of Composite PMI readings suggest growth in the range of 2.5-3 percent per annum, which exceeds even the rosier forecasts for 2017 at 1.7 percent. Interestingly, unlike in the case of China, Russian economic recovery is not based on either monetary or fiscal stimuli. Monetary policy in Russia remains fully focused on containing inflation and current interest rates are approximately 2.5-3.5 points too high to support even modest growth in investment. Meanwhile, fiscal policy remains conservative and the Government has been extremely reluctant to ease fiscal purse strings, absent access to normal funding markets, given the levels of geopolitical uncertainty, and having little support for its budget from primary commodities prices.

2) Chinese Composite PMI is also showing signs of a break-away fro  the recent trends. However, the reading is still only one quarter in the duration and is clearly anchored to aggressive monetary and fiscal easing. As the result, I am reluctant to call this a structural trend change.

3) India’s one quarter fall in Composite PMIs is a signal to watch. Currently, it is too early to call this a shift in a trend and there are non-structural reasons that might be behind this growth slowdown (e.g. de-monetization policey etc), but over 2Q 2014-1Q 2016 and less so during 2Q-3Q 2016, Indian economy was supportive of stronger growth across BRIC group and contributed positively to BRIC share of Global GDP expansion. The 4Q 2016 reading is putting this into question.

4) Brazil remains in deep economic recession. Over the last 5.5 years, Brazil’s Composite PMI has averaged just 48.3, with the last three years average reading of just 46.0.

11/9/16: BRIC PMIs: Composite Activity - August

In the previous post I promised to update Composite PMI indicators for BRIC economies, so here it comes.

The good news is that Russia and India are posting Composite readings that are statistically significantly above 50.0 for the second month in a row. For Russia, this is the third consecutive month of Composite PMI readings statistically above 50.0 and for India - second.

The bad news is that Brazil acts as big drag on BRIC growth with severely depressed Composite PMI reading for 18th month running. Worse, Brazil's position has deteriorated in August compared to July.

Meanwhile, China posted virtually unchanged Composite PMI in August compared with July, with both readings being very close to signalling statistically significant expansion. Last time China posted statistically significant reading above 50 line was in August 2014.

Couple of charts to illustrate the trends:

As the chart above indicates, Russia remains a driver to the upside in terms of BRIC economies PMIs, with Brazil acting as a major drag and China as a driver toward lower growth.

Good news: across overall BRIC grouping, growth remains positive (albeit very shallow) and is ticking up (albeit with increased volatility). Bad news: since 1Q 2013, BRIC economies as a group are showing extremely low growth performance compared to their historical trends (red box in the chart below).

3/3/16: BRIC Composite Activity - February

On a cumulative basis (based on Composite PMIs for each country), the BRIC economies as a group have posted a very disappointing performance in February 2016.

Note: for this index, 100.0 is a zero growth marker.

Russian economy Composite Indicator posted a positive upside surprise, rising from a contractionary reading of 96.8 in January to a weakly-expansionary reading of 101.2. 3mo average through February 2016, however, remains below 100 line at 97.9, which is weaker than the 3mo average through November 2015 at 100.3. The details of Russian Manufacturing sector woes are covered here: http://trueeconomics.blogspot.com/2016/03/2316-bric-manufacturing-pmi-february.html, while details of Russian Services and Composite PMIs upside are covered here: http://trueeconomics.blogspot.com/2016/03/3316-russia-services-composite-pmi.html.

As a result, Russian economy acted as a factor pushing up BRIC rates of growth in February:

In contrast with Russia, Chinese Composite Indicator posted a significant contraction in February, falling from 100.2 (zero growth) in January 2016 to 98.8 (weak contraction) in February. On a 3mo average basis, the index is now at 99.3 for the period through February 2016, up marginally on 98.9 reading for the 3months through November 2015, but down on 102.4 reading for the 3mo average through February 2015. Details of Chinese Manufacturing PMIs are covered here: http://trueeconomics.blogspot.com/2016/03/2316-bric-manufacturing-pmi-february.html, while details of Services and Composite PMIs are covered here: http://trueeconomics.blogspot.com/2016/03/3316-china-services-composite-pmi.html.


India’s Composite Indicator fell from 106.6 in January to 102.4 in February, signalling major slowdown in the rate of economic expansion. 3mo average through February 2016 is at 104.1, reflecting robust growth in January, and up on 102.9 3mo average through November 2015, but below 105.3 reading for the 3 months period through February 2015. The weakness in the Indian economic growth is highlighted by comparison to the historical average, which stands at 109.5.

Per Markit: “February data showed that services firms and goods producers alike registered weaker increases in activity. …Falling to a three-month low of 51.4 in February, from 54.3 in January, the seasonally adjusted Nikkei Services Business Activity Index highlighted a softer expansion of output that was only marginal. Where growth was seen, businesses reported higher levels of incoming new work. Although new orders at services firms continued to rise in February, the rate of expansion eased to the weakest since last November as firms reportedly faced strong competition for new work during the month. A quicker increase in order book volumes in the manufacturing economy was insufficient to prevent growth of private sector new orders from easing to a three-month low.”

Conditions in Indian Manufacturing are covered in detail here: http://trueeconomics.blogspot.com/2016/03/2316-bric-manufacturing-pmi-february.html.


Meanwhile, Brazil remained the sickest economy in the BRIC group. Composite Indicator for Brazilian economy sunk to an all-time low of 78.0 from an already recessionary 90.2 in January. As the result, 3mo average for Brazil’s Composite Indicator was at 85.3, down on already extremely weak 86.6 recorded over the 3 months through November 2015 and on 100.1 3mo average through February 2015.

According to Markit: “The downturn in the Brazilian economy took a noticeable turn for the worse in February. Business activity, new orders and employment all fell at, or near to, the fastest rates since the combined manufacturing and service survey began in March 2007. Companies continued to link the adverse operating environment to the ongoing economic, financial and political crises. …Accelerated downturns were registered at manufacturers and service providers alike, although the slump at services companies was especially severe. At 36.9 in February, down from 44.4 in January, the seasonally adjusted Markit Services Business Activity Index posted its lowest reading in the nine-year survey history. Business activity has fallen in each of the past 12 months.”

Brazil’s Manufacturing PMIs were covered in detail here: http://trueeconomics.blogspot.com/2016/03/2316-bric-manufacturing-pmi-february.html.

The summary of changes in both manufacturing and Services sectors across all BRIC economies is here:

Thus, overall, global GDP-weighted BRIC PMI Indicator (computed by me) fell to 98.4 - signalling moderate or mild contraction, down from January reading of 100.6. The Index is now registering sub-100 readings in seven out of nine last months. Worse, BRIC economies last posted a statistically significant reading for growth back in December 2014. On a 3mo basis, 3 months average through February 2016 is at 99.1, which is basically unchanged on 3mo average through November 2015 (99.0) and significantly lower than the 3mo average through January 2015 (101.8). Starting with February 2015, the index has been averaging zero growth.