7/1/16: BRIC Brake on Global Growth

As I noted in analysis of the BRIC Composite PMIs (http://trueeconomics.blogspot.ie/2016/01/6116-bric-composite-pmis-december.html) December turned out to be another month when BRIC economic fortunes were weighing on the global economy.

As a reminder, overall 4Q 2015 BRIC Composite Activity Index stood at 99.0, down on 99.2 in 3Q 2015 and on 102.1 recorded in 4Q 2014.

Sectorally, both Services and Manufacturing Aggregate Indices for BRIC group of countries continued to trend down - a trend now running uninterrupted since the start of 2H 2010 and accelerating since 2H 2014 for Manufacturing.

Meanwhile, Global Composite PMI slipped in 3Q and 4Q 2015 below longer trend (that is still gently upward).

Chart below illustrates:

6/1/16: BRIC Composite PMIs: December

In recent posts, I covered Manufacturing sector PMIs for BRIC economies based on monthly data and Services Sector PMIs here.

Now, let’s consider Composite PMIs for BRIC:


Brazil Composite PMI fell from 44.5 on November to 43.9 in December, As the result, the economy posted 10th consecutive month of sub-50 readings, and since April 2014, Brazil’s economy registered above 50 readings in only three months, with none of these three readings being statically significantly different from 50.0. The last time Brazil’s Composite PMI posted reading statistically consistent with positive growth was in February 2013.

In December, both Manufacturing and Services sectors indicated contracting activity, with Markit concluding that “Private sector activity in Brazil continued to plunge in December as a deepening economic retreat contributed to a further contraction in new business. The seasonally adjusted Composite Output Index fell from 44.5 in November to 43.9 at the year end, pointing to a sharp and stronger rate of reduction. Whereas the downturn in manufacturing production eased (though remained severe), services activity declined at a quicker pace.”

Over 4Q 2015, Brazil Composite PMI averaged 43.7 which is about as bad as the average of 43.6 achieved in 3Q 2015 and much worse than already contractionary average of 49.0 posted in 4Q 2014.


Russian Composite PMI was covered in detail here. Overall, Russia’s Composite index slipped into contraction during December, falling to 47.8, from 50.5 in November, with the decline in output reflected across both manufacturing production and services activity. Overall, Russian economy’s composite PMI averaged 49.1 in 4Q 2015 which is much worse than 50.4 average for 3Q 2015. The data strongly suggests that not only did the economy failed to attain stabilisation, but that growth might have turned more negative in 4Q 2015.


Chinese Composite PMI also signalled declining business activity in December, falling to 49.4 from 50.5 in November. Overall, China posted four months of below 50 readings on Composite PMIs out of the last 5 months and the last time Chinese Composite PMI was consistent with statistically significant growth was in August 2014. In 4Q 2015, Chinese Composite PMI averaged 49.9, which is better than 3Q 2015 average of 49.2, but much worse than the 4Q 2014 average of 51.6. Unlike Russia and Brazil, which posted sub-50 readings across both Manufacturing and Services, China posted sub-40 reading in Manufacturing and above 50 reading in Services, That said, the Services reading was 50.2 - statistically consistent with zero growth - and the second weakest on record (the weakest point was 50.0 in July 2014).


India Composite PMI rose unexpectedly from November’s five-month low of 50.2 to a four-months high of 51.6 in December. Thus, per Markit, the index was “indicative of a rebound in growth of private sector activity. Whereas manufacturing production decreased for the first time since October 2013, services activity increased at an accelerated pace.”

Further per Markit: “Leading services activity to increase was a solid rise in incoming new work, one that was faster than that seen in November. Anecdotal evidence highlighted strengthening demand conditions. Conversely, manufacturing order books decreased, with panellists indicating that demand had been suppressed by the Chennai floods. Across the
private sector as a whole, new business inflows expanded at a faster pace that was, however,
modest.”

4Q 2015 Composite PMI for India stood at 51.5, down from 52.1 in 3Q 2015 and down on 52.2 average for 4Q 2014.


Overall Russia was a negative contributor to the BRIC Composite Activity Index dynamic in December, although overall ex-Russia group performance continued to deteriorate in December faster than in November, as indicated in the chart below:

Note: Composite Activity Index is based on my own calculations weighing BRIC economies by their shares of global GDP. The Index is based on a scale of 100=zero growth.

In 4Q 2015, average Composite Activity Index for BRIC ex-Russia was 96.7 which was marginally better than in 3Q 2015 (86.5) but worse than 101.8 average for 4Q 2014.

Overall 4Q 2015 BRIC Composite Activity Index stood at 99.0, down on 99.2 in 3Q 2015 and on 102.1 recorded in 4Q 2014. 

The chart below shows a clear downward trend in BRIC activity setting on from June 2014 and accelerating since May 2015.

6/1/16: BRIC Services PMIs: December

In recent posts, I covered Manufacturing sector PMIs for BRIC economies based on monthly data (http://trueeconomics.blogspot.ie/2016/01/4116-global-manufacturing-weighted-down.html) and Russian Manufacturing PMIs based on quarterly data (http://trueeconomics.blogspot.ie/2016/01/4116-russian-pmi-in-4q-2015-signalling.html).

The net outrun was that global manufacturing has ended 2015 an inch closer to zero growth / stagnation point and certainly nowhere near the levels of growth consistent with amplification in global economic growth rates forward. Most of this trend is down primarily to BRIC economies all of which have seen Manufacturing PMI falling below 50 marker for the first time since March 2009. As noted, this evidence strongly suggests overall continued downward pressures on growth in world’s largest emerging markets.

Now, consider Services PMIs.


Russian Services PMI data was covered in the earlier post here: http://trueeconomics.blogspot.ie/2016/01/4116-russia-services-manufacturing-pmis.html on monthly basis and on quarterly basis here: http://trueeconomics.blogspot.ie/2016/01/4116-russian-pmi-in-4q-2015-signalling.html. The key takeaway from these was that the data strongly suggests that not only did the economy failed to attain stabilisation, but that growth might have turned more negative in 4Q 2015 in both services and manufacturing sectors.


China Services PMI eased to 50.2 in December, down from 51.2 in the previous month, statistically signalling zero growth in the Services sector. This marks the second-lowest index reading since the series began in November 2005 (behind July 2014). 4Q 2015 average reading stands at 51.1, which is weaker than 3Q reading of 51.9 and well below the 4Q 2014 reading of 53.1.

Per Markit release: “Relatively subdued client demand … was highlighted by only a marginal
increase in new work at service providers that was one of the weakest seen in the series history.”


India Services PMI unexpectedly hit a 10-month high at 53.6 in December up on November’s zero growth 50.1. Overall, Services PMI came in with a strong indication of positive expansion in output across the sector. This pushed 4q 2015 average to 52.3, ahead of 3Q 2015 average of 51.3 and above 51.2 average for 4Q 2014.

Per Markit: “Sub-sector data indicated that output rose in four of the six broad areas of the service economy, the exceptions being Hotels & Restaurants and Transport & Storage. The best performing categories in December were ‘Other Services’ and Financial Intermediation. Leading services activity to increase was a solid rise in incoming new work, one that was faster than
that seen in November. Anecdotal evidence highlighted strengthening demand conditions.” This puts Services dynamics at odds with Manufacturing which posted a significant contraction.


Brazil Services PMI tanked from already abysmal (albeit 8-mo high) 44.5 in November to 43.9 in December, with economy beating “deepening economic retreat”.

Per Markit: “Survey participants commented that worsening economic conditions led new business and activity to decrease. All six monitored subsectors posted lower activity in December, a trend that has been observed throughout the past eight months. The quickest rates of decline were seen in ‘Other Services’, Renting & Business Activities and Post & Telecommunication. Leading services activity to decrease was a further drop in incoming new work. Having accelerated since November, the pace of reduction was among the fastest in the survey history. Panellists indicated that a deepening economic downturn restricted clients’ confidence in committing to new projects.”

4Q 2015 average for Brazil Services PMI now stands at 44.0, up on 3Q 2015 reading of 41.9, but overall so poor, one can’t talk about any improvement at these levels of signalled contraction.


Summary of movements in PMIs for BRIC economies is provided in the table below:

Chart illustrates trends in Services:

I will be covering composite PMIs next, but overall Services PMIs conclusion is that a positive improvement in India was offset by deteriorating growth in China and outright fall-offs in activity in Russia and (much worse) in Brazil. Overall, the data from Services compounds the already rotten data from Manufacturing.

6/1/16: Debt Pile: BRICS v BRIS

When it comes to debt pile for the real economic debt (Government, private non-financial corporates and households), China seems to be in the league of its own:

Per chart above, China’s debt is approaching 250 percent of GDP, with second-worst BRICS performer - Brazil - sitting on a smaller pile of debt closer to 140 percent of GDP. The distance between Brazil and the less indebted economies of South Africa and India is smaller yet - at around 12-14 percentage points. Meanwhile, the least indebted (as of 1Q 2015) BRICS economy - Russia - is nursing a debt pile of just over 90 percent of GDP, and, it is worth mention - the one that is shrinking due to financial markets sanctions.

3/12/15: BRIC Composite PMIs: November

In two previous posts, I have covered November BRIC PMI (released by Markit):

• For Manufacturing Sector and
• For Services Sector.

Summary table of both here:

Now, consider Composite PMI readings:

Russian Composite PMI came in at 50.5 in November, which marks an improvement on 49.0 reading in October. Per Markit: “…the composite index for Russia returned to expansionary territory in November. At 50.5, up from 49.0, the latest reading was led by the manufacturing sector, which registered its strongest rate of growth in one year.” Composite employment activity contracted. Overall, the pattern since May 2015 has been for a one month of above 50 reading followed by a month of sub-50 reading. Thus, 3mo average through November is now at 50.2, while 3mo average through August is at 49.8. Both compare favourably to the 3mo average through November 2014 which stands at 49.2, but both 3mo averages are weak. In simple terms, Russian economy is bouncing along the bottom of the sub-cycle with no catalyst to the upside.

China Composite PMI came in at 50.5 in November, breaking three consecutive months of sub-50 readings, but posting, nonetheless an extremely weak expansionary reading. 3mo average is at 49.5 through November 2015, down on 50.5 3mo average through August 2015 and down on 51.7 3mo average reading through November 2014. All signs are of a major slowdown in the Chinese growth counting in November. Per Markit: “business activity in China increased for the first time in four months in November. That said, the rate of expansion was only marginal… The renewed increase in overall Chinese business activity was supported by a further rise in service sector activity in November. That said, the pace of expansion eased since October and was only modest. …Meanwhile, manufacturing production stabilised in November, following a six-month sequence of reduction. After a solid expansion in October, total new work placed at Chinese service providers rose only slightly in November. According to panellists, relatively weak market conditions had softened client demand in the latest survey period. Furthermore, September 2015 excepted, the latest increase in new work was the slowest seen in 16 months. In contrast, manufacturing firms saw a further decline in new business during November. Though modest, the decrease in new order volumes at manufacturers offset the increase at service providers, and led to a slight fall in composite new business.”

Indian Composite PMI fell sharply from 52.6 in October to 50.2 in November. On a 3mo average basis, reading through November 2015 is at 51.5 which is marginally better than 5.4 reading in 3mo through August 2015 and down on 51.7 reading in 3mo period through November 2014. Per Markit: “Posting a five-month low of 50.2 in November (October: 52.6), the seasonally adjusted Nikkei India Composite PMI Output Index was indicative of little-change in the level of private sector activity in India. Growth of manufacturing production softened to the slowest in the current 25-month sequence of expansion, while services activity broadly stagnated. …Indian services companies saw demand growth lose strength during November, leading to the slowest rise in incoming new work since July. …Order book volumes in the manufacturing economy increased for the twenty fifth straight month, although at the weakest pace in this sequence.”

Brazil’s Composite PMI remained deep into contraction territory at 44.5 in November, which is an improvement on an abysmal 42.7 reading in September and October 2015. On a 3 mo average basis, reading through November 2015 stands at 43.3, which is below the already weak 43.7 reading for the 3mo period through August 2015 and well below the 49.2 reading through November 2014. November 2015 marks 9th consecutive month of sub-50 readings in the series for Brazil making the Latin American economy the worst performer in the group of BRIC economies for the ninth month running. Per Markit: “Output, new orders and employment shrunk across the manufacturing and service sectors”, with downturn being more pronounced in manufacturing. Overall “weaker contraction in private sector activity” came on foot of “a softer reduction in services output, as manufacturing production dropped at the second fastest pace in 80 months.”

Charts to summarise the trends (note: charts use my own Composite BRIC index based on 100=zero growth line):

The above chart clearly shows that Russia is currently acting as a positive driver for BRIC Composite PMI dynamics. The core downside driver is Brazil.

Summary: per chart above, BRIC economies continued to exert negative pressure on global growth rates in November for the fourth consecutive month running. More importantly, BRIC economies posted growth conditions consistent with slower (than global ) growth since July 2014.  This scenario - of negative impact of BRIC growth on global growth conditions - is likely to remain in place in months to come as all BRIC economies continue to face downside risks to their growth rates.

3/12/15: BRIC Services PMI: November

BRIC Services PMIs are in for November, so let’s take a quick look at the headline numbers:

Russia: 
Russian Services PMI came in at 49.8 in November - a whisker away from 50.0 - and up on 47.8 in October. This marked second consecutive month of sub-50 readings in the series. 3mo average through November is at 49.6, which is weaker than the 3mo average through August 2015 (50.1) but stronger than the 3mo average through November 2014 (47.5). Per Markit: Service sector business activity declined only fractionally in November, although new business contracted for first time in eight months and outstanding business deteriorated further. “With backlogs of work falling, Russian service providers continued to shed jobs during November. Moreover, job cuts have been recorded in every survey period since March 2014. Panel members mentioned a contraction in employee numbers reflected efforts to cut excess capacity”.

China: 
Chinese Services PMI weakened in November to 51.2 from 52.0 in October, with 3mo average through November now at 51.2, down on 52.4 3mo average through August 2015 and on 53.1 average through November 2014. Given that Chinese Services PMI never registered sub-50 reading, current reading is consistent with statistically zero growth. Per Markit release, the index is now in a six=months long trend of falling PMI readings. “After a solid expansion in October, total new work placed at Chinese service providers rose only slightly in November. According to panellists, relatively weak market conditions had softened client demand in the latest survey period. Furthermore, September 2015 excepted, the latest increase in new work was the slowest seen in 16 months.”

India: 
Indian Services PMI posted a significant retrenchment from 53.2 in October to 50.1 in November, effectively signalling zero growth in the sector and falling to the lowest level in 5 months. 3mo average through November is at 51.5, well ahead of current month reading that matches exactly 3mo average through August 2015. 3mo average through November 2014 stood at 51.4. Per Markit: “Sub-sector data indicated that output growth in the Financial Intermediation, Post & Telecommunication, Renting & Business Activities and ‘Other Services’ categories was offset by declines at Transport & Storage and Hotels & Restaurants firms. In fact, the latter recorded a sharper rate of reduction. Indian services companies saw demand growth lose strength during November, leading to the slowest rise in incoming new work since July. Survey members blamed fierce competition and frail economic conditions for the slowdown in growth of new work.”

Brazil: 
Brazil remains the weakest link in the BRIC group in terms of economic activity, with country Services PMI rising to 45.5 in November from 43.0 in October, still signalling sharp contraction in the sector, and marking ninth consecutive month of sub-50 readings. On a 3mo average basis, 3mo average through November was 43.4, which is an improvement on 3mo average through August 2015 (41.3) but down on 3mo average through November 2014 (49.3). Per Markit: “Sub-sector data highlighted a broad-based recession, with output, new business and employment falling across all six monitored categories. Leading services activity to decrease was a further drop in incoming new work, the ninth in as many months. Despite being the softest since August, the rate of reduction was sharp. Evidence from survey participants indicated that demand had been suppressed by the country’s fragile economic situation.”

Summary: Overall, therefore, BRIC services sectors have been performing poorly in November 2015, with no upside to growth form the sector in any economy. Brazil is the weakest performer in the group, with Russia being second weakest. India’s growth momentum of July-October 2015 is now exhausted, while China showing downward trend in Services growth since July 2015.


Next up: Composite PMIs and analysis

2/12/15: BRIC Manufacturing PMI: November

BRIC countries manufacturing PMIs are out via Markit, so here are the main insights:

• Russia: I covered Russian Manufacturing PMI earlier here, with a core conclusion as follows: In November, Russian Manufacturing posted a second monthly reading consistent with weak stabilisation, but virtually no signs of recovery. That said, Russian Manufacturing performance was second strongest in the BRIC group after India’s in November, which is consistent with all readings since July 2015.
• Brazil: In contrast to Russia, Brazil posted another massive deterioration in Manufacturing PMI, with index reading falling to an 80-months low of 43.8 from an already extremely poor reading of 44.1 in October. Overall, we now have 10 consecutive months of sub-50 readings and this dovetails with the latest GDP figures showing Brazil’s economy in a third consecutive quarter of recession at -1.7% in 3Q 2015. Per Markit: “PMI slides further, reaching 80-month low; Production contracts at steep rate amid sharp drop in new projects; Workforce numbers fall at quickest pace since April 2009.” Brazil is now the main laggard in the BRIC group in Manufacturing sector every month since March 2015. Dynamics-wise, things are getting worse: 3mo average through November is at 45.0, which is below 3mo average through August (46.5) and 3mo average through November 2014 (49.0).
• China manufacturing PMI remained below 50.0 mark for the 9th consecutive month in November, posting a reading of 48.6 - marginally better than 48.3 in October. 3mo average through November 2015 is at 48.0, which is marginally worse than 3mo average through August 2015 (48.2) and well below 50.2 3mo average reading through November 2014. Per Markit: “Chinese manufacturing firms signalled that output stabilised in November, thereby ending a six-month sequence of reduction. Meanwhile, total new work continued to decline, and at a similarly modest rate to that seen in October, despite a pick up in new export business growth. Relatively soft overall client demand led firms to scale back their purchasing activity again in November, while inventories also declined. Deflationary pressures intensified over the month, as highlighted by sharper decreases in both input costs and output prices.” China is currently the second weakest BRIC economy in Manufacturing terms every month running, since July 2015.
• India: Continuing to outperform other BRIC, India Manufacturing PMI has, nonetheless, posted a major deterioration in growth conditions in November, falling to 50.3 in November - a 25 months low - from 50.7 in October. 3mo average through November 2015 is at 50.7, below 3mo average through August (52.1) and below 3mo average through November 2014 (52.0).Per Markit: “The health of India’s manufacturing economy improved for the twenty-fifth successive month in November, although to the least extent in this sequence. The latest PMI data showed slower increases in incoming new business and output, while subdued demand growth led firms to keep workforce numbers broadly unchanged. Meanwhile, input cost inflation accelerated to the strongest since May, whereas factory gate prices were raised at a weaker rate that was marginal overall.” Given the historical levels of the series, 50.3 is not statistically distinguishable from 50.0, which implies that statistically, November reading (as well as October) was not consistent with above zero growth. 

Core outrun:

Overall, Manufacturing activity contracted in November across BRIC economies, signalling continued pressure on growth in world’s largest emerging markets. Forward indicators are also weak, with new orders pipeline and backlogs of work being depressed across majority of BRIC manufacturing sectors.

6/11/15: BRIC Composite PMIs for October: Some Sunny Spells Amidst a Downpour

Having covered 

• BRIC Manufacturing PMIs for October here, and
• BRIC Services PMI here (),

now, let’s take a look at Composite PMIs

India:

India’s composite PMI rose from 51.5 in September to 52.6 in October, indicating stronger growth in private sector activity across the country and the joint-fastest pace of growth since March 2015. Per Markit: “The latest improvement was driven by services, as goods producers saw growth of production wane.” 3mo average though October 2015 stood at 52.2, signalling faster growth in the 3mo average through July (50;9) and an increase in there ate of growth compared to 3mo period through October 2014 (51.2). This marks fourth consecutive month of above 50 reading for India and also a fourth consecutive month of India leading BRIC group in growth terms.

China: 

China Composite PMI signalled some early signs of stabilisation of Chinese business activity in October, posting reading of 49.9, up from September’s 80-month low of 48.0. Nonetheless, the index reading in October was the third lowest since May 2014. On a 3mo average basis, 3mo reading through October 2015 was at poor 48.9, down on 50.9 for the 3mo period through July 2015 and down on 51.9 3mo average through October 2014. October marked a third month in a row of negative growth across the Chinese economy, although relative position of Chinese economy in BRIC rankings did improve from being second worst in July-September to third worst in October.

Russia:

Russian Composite PMI posted a very disappointing reading of 49.0 in October, down from 50.9 in September. On a 3mo average basis. Russian Composite PMI fell from 50.1 reading for the 3mo average through July 2015 to 49.7 for the 3mo period through October. 3mo average through October 2014 was 50.0. Per Markit release: “The Russian service sector returned to contraction territory at the start of the fourth quarter of 2015 as new work stagnated and excess capacity persisted. …In contrast, manufacturing output rose for a second successive month and to the highest degree since

last November. However, growth was insufficient to prevent the composite index slipping to a seven month low of 49.0 (from 50.9 in September).” Thus, in October, Russia moved to the position of second weakest growth in the BRIC group.

Brazil:

Brazil’s Composite PMI remained unchanged at 42.7 in October, staying below 50.0 reading threshold for the eighth month running, “highlighting the longest sequence of continuous decline in Brazilian private sector output since the global financial crisis. Sharp rates of contraction were noted in both the manufacturing and service sectors. …the latest reduction in employee headcounts was the most pronounced since composite data were first available (March 2007).” 3mo average through October stood at abysmally poor 43.4, which is marginally worse than 43.5 3mo average through July 2015 and significantly below the recessionary reading of 49.5 recorded over the 3 months through October 2014.

As chart above indicates, overall Composite Activity Index for BRIC economies as a whole continued to take water with both trend and current reading well below 100.0 marker of zero growth.

Brazil continues to lead BRIC group into recessionary territory in terms of aggregate growth, with Russia now ranked as second lowest growth momentum economy. On a simple average basis, BRIC Services PMI came in at around 49.0 with Manufacturing coming at 48.3, suggesting that overall growth conditions remain weak across the world’s leading EMs. 

6/11/2015: BRIC Services PMIs: Continued Weakness in October

Having covered BRIC Manufacturing PMIs for October here, now, let’s take a look at Services PMIs

India:
Indian Services PMI rose to an eight-month high of 53.2 in October form September reading of 51.3. This marks fourth consecutive month of above 50.0 readings in the sector. 3mo average through October 2015 stood at 52.1, up on 49.4 3mo average reading though July 2015 and up on 50.7 3mo average through October 2014. Per Markit, “activity growth was noted in three of the six surveyed categories… Underpinning growth of services activity was a quicker increase in new business inflows. Incoming new work expanded at a solid pace that was the most pronounced since February.” In summary terms, Indian services performance improved in October, although growth rates singled remain below their historical average of 54.6.

China: 
China Services sector activity rose at a quicker rate in October (52.0) compared to September (50.5) and the fastest rate of expansion since July 2015. Per Markit, however, “…the latest reading was indicative of only a modest rate of growth that was slower than the historical average. Service sector companies saw a further rise in total new business during October. In line with the trend for activity, the rate of new order growth picked up from September’s recent low and was solid overall.” That said, 3mo average reading for the index through October stood at 51.3, which is lower than 3mo average reading of 53.0 for the period through July 2015 and is down on 53.5 3mo average through October 2014. Thus, overall, China’s Services sector has managed to turn around persistent declines in PMI readings over the previous 3 months, but activity levels in October stood well below historical average of 55.2.

Russia:
Russian Services PMI posted a disappointing sub-50 reading in October at 47.8 down from 51.3 in September, basically quashing the hopes of growth momentum reversal. 3mo average through October is now at 49.4, which is worse than 51.3 average for the 3mo period through July 2015 and is identical to the reading for the 3mo period through October 2014. Per Markit release: “Latest data marked the third time in the past five months that a sub-50.0 reading has been recorded, and October’s index level was also the lowest seen since March.” This contrasts the latest reading for Manufacturing PMI that posted an improvement rising to 50.2 in October. However, with Services in a clear contraction territory and Manufacturing statistically indistinguishable from zero growth, the Composite PMI for Russia posted sub-50 reading as well. Again, per Markit: “With the exception of the Communications sector, all services sub-categories recorded a decline in activity during the month. Sub-par performance was linked to a challenging economic environment which had a negative impact on sales, which stagnated at the aggregate service sector level in October. This thereby ended a six-month sequence of new business growth, and there were some reports that the sourcing of capital funds remained tough (although in terms of sector performance Communications was again a notable outlier,
registering a strong increase in new work).”


Brazil:
Brazil Services PMI posted another abysmally poor reading in October at 43.0, up on horrific reading back in September. On a 3mo average basis, 3mo average through October 2015 stood at 43.2, above 40.5 3mo average through July 2015, but down 49.5 recorded for the 3mo period through October 2014. This marks 8th consecutive month of sub-50 readings for the country Services sector and 9th consecutive month of sub-50 readings in Manufacturing activity. Per Markit release: “Panel member reports highlighted frail economic conditions across the country. Incoming new work received by Brazilian service providers continued to decrease in October. Furthermore, the rate of contraction was steep as highlighted by the respective index sliding to a 79-month low.”

Table below summarises main changes:

Chart below shows developing trends:

As shown above, Brazil continues to lead BRIC group into recessionary territory in the Services sectors, with latest moderation in the rate of contraction not sufficient to compensate for activity declines over the period from march 2015 on. Back in Aril 2015, Brazil pushed past Russia as the driver to the BRIC group downside and it remains in this ‘leading’ position. Another disappointing signal came from Russia, where Services PMI singled renewed and relatively sharp pressures to the downside. This single is consistent with the view of the Russian economy as being well outside the bounds of the recovery momentum. In contrast, both India and China posted improvements in the rates of growth in October in the Services sector, although Chinese data is clearly subject to serious questions about its quality.

Overall, however, on a simple average basis, BRIC Services PMI cam in at around 49.0 with Manufacturing coming at 48.3, suggesting that overall growth conditions remain weak across the world’s leading EMs.

4/11/15: BRIC Manufacturing PMI: October Blues

BRIC Manufacturing PMIs by Markit for October were out earlier this week, so here is the summary of latest changes:

Russia:
Russian manufacturing PMI posted a reasonably significant improvement, rising from 49.1 in September to 50.2 in October, and marking the first month since November 2014 of above 50 readings. That said, the indicator is statistically indistinguishable from 50.0 and the level of activity uplift is weak. Per Markit release, “new orders placed with manufacturing companies in Russia grew for the second successive month in October. The rate of expansion was the sharpest since November 2014, despite being modest overall. The increase in new business was driven by stronger demand from the domestic market, however, as new export orders declined. …Workforce numbers at Russian manufacturers contracted in October. However, the latest reduction in headcounts was the weakest for seven months. The sharpest drop in employee numbers was registered by consumer goods producers, according to sector data.” On a 3mo average basis, 3mo average through October stood at 49.1, somewhat better than 48.2 3mo average through July 2015, but still below 50.6 reading in 3mo through October 2014. Overall, Manufacturing reading for Russia confirms weak stabilisation in growth trend with PMIs rising for the second consecutive month. At this stage, it is too early to call recovery based on these readings, but a positive sign is that Manufacturing sector is no longer a negative factor in determining growth in the economy. 

India:
Indian Manufacturing PMI posted weaker reading in October, falling to 50.7 from 51.2 in September. This is the weakest reading in the index since December 2013 (when it stood at 50.7 as well). On a 3mo average basis, 3mo average through October stood at 51.4, weaker than 52.2 3mo average through July 2015, and marginally below 51.7 reading in 3mo through October 2014. Per Markit release: “the latest PMI dataset highlighted weaker growth of both output and new orders. Encouragingly, companies added to their worforces for the first time since January and continued to increase buying levels. …the PMI has recorded above the crucial 50.0 threshold in each month since November 2013. Output growth eased in October on the back of a slower increase in new orders.” In summary, Indian manufacturing sector has avoided contraction in activity, but growth conditions have again deteriorated - with index declining for the third month in a row.

China:
Chinese manufacturing PMI came in at 48.3 in October, up from 47.2 in September, but still below 50.0. This means that Chinese manufacturing has now been in a contraction territory for the 8th consecutive month. 3mo average through October stood at 47.6, weaker than 48.8 3mo average through July 2015, and below 50.3 reading in 3mo through October 2014. Per Markit: “Total new business declined only modestly, helped in part by a renewed increases in new export orders. This in turn contributed to softer contractions of output and employment in October. Operating conditions have now worsened in each of the past eight months, though the latest deterioration was the weakest since June.”

Brazil:
Brazil manufacturing sector shrunk at a record breaking pace, posting October PMI at 44.1 down from an already abysmal 47.0 in September. This marks the lowest reading in PMI for 79 months running and ninth consecutive month of sub-50 readings. 3mo average through October is now standing at 45.6, which is down from the extremely poor 46.5 3mo average through July 2015. Over 3mo through October 2014 the index was reading 49.5. Per Markit: “PMI data for October indicated that Brazil’s manufacturing recession worsened. Rates of contraction in both output and new orders accelerated to the fastest since the financial crisis, leading companies to cut jobs at the quickest pace in six-and-a-half years. Output fell for the ninth consecutive month, the longest sequence of continuous reduction since the global financial crisis. ...October saw the rate of contraction accelerate to the sharpest since March 2009.”

Overall:
BRIC Manufacturing sector performance posted very poor figures in October, following on already poor performance in 3Q 2015. This suggests that the global economic growth slowdown remains in place despite some firming up if data coming from Europe. Amongst BRIC economies, India remains the strongest performer, with Russia now close second. China is continuing to post weak data, while Brazil is in an outright deep sectoral recession.

6/10/15: BRIC Quarterly Economic Activity & PMIs: 3Q 2015

Now, as promised, the summary of 3Q 2015 BRIC PMIs and the insights these give us into global growth trends. Note: series history refers here to data from 1Q 2006, since some countries in the group only started collecting PMI data from that period.

Brazil:

• Brazil’s Manufacturing PMI averaged poorly 46.7 in 3Q 2015, which is… drum roll… an improvement on disastrous 46.1 recorded in 2Q 2015. All in, Brazil manufacturing sector contraction is now 6 consecutive quarters-long. Over the last two consecutive quarters, Brazil posted the worst Manufacturing sector performance of all BRIC economies. 
• Meanwhile, Brazil Services PMI tanked to 41.9 on 3Q 2015 average basis from already abysmal 42.3 reading in 2Q 2015. This means that Brazil Services sectors are in a deep contraction over the last 6 months and the rate of contraction accelerated in 3Q 2015. This is the worst quarterly reading in all BRIC economies for Services sector for the second consecutive quarter running and the fourth consecutive quarter of recession in Brazil’s Services. 
• While Manufacturing PMI in 3Q 2015 was the fifth lowest in history of the series, Services PMI hit its lowest level in history. In brief, Brazil is in deep trouble and is currently the worst performer across both manufacturing and services sectors of all BRIC economies. Brazil recorded now four consecutive quarters of sub-40 readings in both indices - the only economy in the BRIC group to have done so (in Russia case, such coincident sub-50 readings have occurred for the duration of only two quarters) in post-Crisis period.

Russia:

• Russian Manufacturing PMI averaged 48.4 in 3Q 2015 unchanged on 48.4 reading in 2Q 2015. This is the lowest (tied with 2Q) reading since 1Q 2014 and marks the third consecutive quarter of sub-50 readings in the sector. The level of contraction singled by 48.4 reading is, however, not particularly remarkable, marking the 6th sharpest rate of activity decline in series history.
• Russian Services PMI posted a reading of 50.7 in 3Q 2015, consistent with weak growth, following 51.0 reading in 2Q 2015 and marking two consecutive quarters of above 50 readings. Growth is still weak in the sector, with 3Q 2015 reading being 9th lowest in series history.
• Overall, Russian economy is still in a recessionary scenario, judging by PMIs although some improvement is visible in the Services side of the economy. In my view, it is too early to call the bottom of the recession, yet, but there are some potentially encouraging signs emerging.
• Russia remained the second weakest economy in the BRIC group, only marginally (by about 0.1 points) underperforming China when comparative is taken across both sectors of the economy.

China:

• Chinese Manufacturing PMI fell off the cliff in 3Q 2015, declining to 47.4 compared to 49.2 in 2Q 2015. This marks second consecutive quarter of sub-50 readings for the index. 3Q 2015 index was 3rd lowest in the history of the series, highlighting just how sharp the deterioration was. Over the last 4 quarters, Chinese manufacturing failed to post a reading above 50.0 in all quarters, meanwhile, over the last 16 quarters, Chinese Manufacturing posted a statistically significant growth reading in only one quarter.
• China Services PMI fell from 52.7 in 2Q 2015 to 51.9 in 3Q 2015. This is the 5th lowest reading in the history of the series and, although nominally above 50.0, statistically is not consistent with a signal of even moderate growth. 
• In simple terms, China is getting dangerously close to statistically zero growth across the economy, which, in my view - given the low quality of Chinese official data - can be anywhere around 3-4 percent official GDP expansion for 2015. Potentially - lower. 

India:

• Indian Manufacturing PMI continued to lead the BRIC economies indices, rising to 52.1 in 3Q 2015 from 51.7 in 2Q 2015. Still, the case of growth is 9th slowest in data series history.
• Indian Services PMI posted a strong rebound from 49.9 reading in 2Q 2015 to 51.3 in 3Q 2015. Even with this rebound, latest indicator is signalling 10th slowest rate of growth in the Services side of the economy.
• Overall, India returned to the scenario of broadly based (across both Services and Manufacturing) growth in 3Q 2015. However, considering past performance, growth across both sectors in India was anaemic in 3Q and it has been weak since the start of 2013.

Charts below illustrate key trends:

Overall, BRIC group activity has been pretty disastrous in recent quarters, as shown in the Chart below

As the above illustrates, combined BRIC Manufacturing index is currently running at 48.5 down from 49.4 in 2Q 2015 and marking second consecutive quarter of sub-50 readings. This the third worst performance level for the indicator. Across Services sectors within the BRIC economies, activity also fell in 3Q 2015 (to 50.7) from already weak 50.9 in 2Q 2015. 3Q 2015 Services reading is 5th worst in history.

Table below summarises recent changes in quarterly PMIs:

Key conclusions: 

• BRIC economies are in a sharp, structural slowdown across both manufacturing and services, with Brazil and Russia lingering in sustained recessions, China effectively falling off the growth cliff and India slowing down, but still generating positive growth. The rot is global - it is driving global trade and currencies imbalances and is also driven by global trade, demand and currencies imbalances. With the world’s largest EMs in deep trouble, one has to wonder how low can global GDP growth revisions go in months ahead.
• The structural or longer-term nature of this rot is best highlighted in the last chart above, showing clearly the dramatic trend decline in Manufacturing activity starting with 2Q 2011, followed with the onset of decline in Services side of the economy in 2Q 2013.

Note: Monthly PMIs for September were covered in previous posts:
- For Services and Composite PMIs: here.
- For Manufacturing PMIs: here.

6/10/15: BRIC Services & Composite PMI: September 2015

BRIC Services PMIs and Composite PMIs are in for September. I covered Manufacturing PMIs for BRTIC economies earlier here.

Unlike Manufacturing sector, BRIC Services sector did much better, posting overall a shallow, but positive growth.

• Russia Services PMI was covered in detail in this post. Overall, in the end Russia Services PMI reading for September ended up being tied for the highest position in the entire group alongside India’s
• India’s Service PMI came in at 51.3, down from 51.8 in August and marking third consecutive month of above 50 readings. The rate of growth singled by the Indian PMI is, however, relatively weak. 
• China Services PMI came in at 50.5, the second weakest reading for a BRIC economy and down on 51.5 in August. Statistically-speaking, just as with Russian and Indian Services indicator, Chinese Services PMI was not distinguishable from zero growth 50.0 marker. For the economy that never posted below 50 reading in its Services PMIs, however, current reading for China is probably consistent with a sector growth plummeting sharply. This is the lowest rate of activity since July 2014. September reading was also second lowest on record.
• Brazil Services PMI was the only reading below 50 in the BRIC group and at 41.7 it is a very poor reading and is below August 44.8. Brazil has now posted the weakest of Services PMIs reading for all BRIC economies every month since March 2015.

As Chart above clearly indicates, Brazil weakness is sharp and sustained over some time now. In contrast, Russia has managed some stabilisation in the Services sector with very strong upward correction starting from February 2015 low. Overall, you can also see the extremely compressed and subdued growth activity in the Sector across the BRIC economies starting with 3Q 2013 on. 

Summary table below highlights recent changes in Manufacturing and Services PMIs for the BRIC economies:

Now, let’s consider Composite PMIs.

• Again, Russia Composite PMI was covered in the separate earlier post here. In comparative terms, Russian Composite PMI was the second highest in the BRIC group after India.
• India Composite PMI came in at 51.5 in September compared to 52.6 in August, marking a deterioration in the rate of growth in the economy. 51.5 reading is border-line significant in statistical terms, suggesting possibly sharper downturn in the economic activity than simple decline of 1.1 points suggests. Still, India posted the best performing Composite PMI of all BRIC.
• China Composite PMI came in at disappointing 48.0 in September, down from an already weak 48.8 in August. Last two months readings suggest negative growth in the Chinese economy, although it is hard to call what exactly is happening in the actual economy. Nonetheless, China was a negative drag on the BRIC growth for the second month in a row.
• Brazil Composite PMI literally is tanking. It hit 42.7 reading in September, down from 44.8 in August. This marks a seventh consecutive month of composite PMI for the country signalling an outright contraction in output. 

Charts above plot BRIC Composite PMIs. Several things worth noting here are:

1. There is continued divergence in Russian PMIs (to the upside) and BRIC ex-Russia PMIs (to the downside) driven by sharp deterioration in Brazil economic environment over the last 7 months. Local peaking of BRIC ex-Russia PMIs in February 2015 is now fully exhausted and in September, BRIC ex-Russia index took a sharp nosedive. Trendiness reflect this divergence and show that it is currently well-established. In other words, although Russian economy is performing poorly, ex-Russia BRIC economies are performing even worse, even if we include into this sub-grouping a relatively well performing India.
2. Overall, BRIC Composite PMI is on a sustained downward trend since June 2014 and in July-September 2015 this downward trend accelerated sharply. BRIC Composite PMI now signals recessionary conditions across the whole group of four largest Middle-Income and Emerging Markets economies. On a longer time line, weak performance in the BRIC economies has been now a feature of the global growth environment since the end of 1Q 2013.

I will be covering quarterly PMI signals in the subsequent post, so stay tuned.

5/10/15: Manning Financial Q4 2015: Economic Update

My Economic Update for Manning Financial for 4Q 2015:

2/10/15: BRIC Manufacturing PMI: 7th month of Sectoral Recession in September

Manufacturing PMIs for BRIC countries for September generally remained on the downward trend established some 7 months ago.

• I have covered Russian Manufacturing PMI earlier here with index reading signalling slower rate of decline in the sector activity in September, rising to 49.1 from 47.9 in August. This is the highest reading in the series since February 2015, but marks 10th consecutive month of sub-50 readings.
• China Manufacturing PMI was covered in detail here showing a strong signal of continued deterioration in the economy.
• Meanwhile, Brazil posted a rise in Manufacturing PMI from horrific 45.8 in August to ugly 47.0 in September. This was the eighth consecutive month of sub-50 readings in Brazil Manufacturing sector, with extremely weak performance setting in back in Q 2014 and continuing basically without interruption since then. Per Markit, “although rates of contraction in new orders and production eased, the downturn remains sharp. Companies continued to shed jobs and reduce inventory levels.” Quarter performance was poor, but I will cover this in a separate post. Brazil is now the worst performing BRIC economy in Manufacturing sector activity for 8 months running.
• India continued to break the BRIC trend, posting another above 50 PMI reading for Manufacturing Sector. India Manufacturing PMI in September was running at 51.2, down from 52.3 in August and marking the slowest pace of growth in seven months, “mirroring a slower increase in new orders. Staffing levels were, consequently, reduced and purchasing activity rose at the weakest pace since December 2013. …New business from abroad expanded at the slowest pace in the current 24-month sequence of growth and one that was marginal overall.”

Table below summarises key readings:

Chart below illustrates key trends:

Overall, Manufacturing activity remains on a downward trajectory in 3 our of 4 BRIC economies, with negative trends accelerating in the case of China (second worst performer for the third month in a row), remaining steady in the case of Brazil (worst performer over last 8 months), slightly moderating in terms of contraction in Russia (third worst performer over the last three months). Meanwhile, growth in India is declining toward anaemic levels of activity. 

1/10/15: Emerging Markets Debt v Equity

Debt, not equity, is the real China Fault Line, even if tremors are rocking its stock markets:

What we have in the above is a record of debt/equity in corporate valuations across the EMs and China. While debt pile relative to equity valuations has grown in the EMs ex-China (though it still sits below parity), in China, growth in debt has been exponential. Inly in 2007 did Chinese debt/equity ratio come close to parity (albeit from above 1) and ever since, debt growth outpaced expansion in equity valuations.

Bad enough. Except when one considers an even more dangerous side to this markets: debt growth likely led equity valuations. Which implies, if confirmed, that Chinese markets investors have simply ignored debt valuations in their balancesheet pricing of Chinese companies. In other words, straight out of Krugmanite book (for countries), 'debt doesn't matter'.

Good luck with that...

1/10/15: Of global equities and Gold

Bloomberg's @M_McDonough just posted a fresh chart for major global stocks indices rebased to the start of 2015:

The scary bit is that this is in own-currency terms and that the rot is well beyond the EMs and China.

I cover some of these issues in a guest contribution to GoldCore's quarterly review for 3Q - read in full here.

3/9/15: ECB Decides to Not Decide, but Reserves a Right to Decide More

ECB decision to hold rates unchanged at today's meeting was hardly of any surprise. This means there is little news in terms of actual policy actions coming from today's council. Instead, some surprises were delivered by Mario Draghi in his statement. Here is a summary.

Firstly, ECB cut GDP projections for the euro area economy. The ECB now expects euro area GDP to grow 1.4% in 2015 (down on previous forecast of 1.5%); 1.7% in 2016 (down of previous forecast of 1.9%) and 1.8% (down on previous forecast of 2.0%). The miracle of "2% growth next year or next after next" has now been abandoned. As the following tweet sums this up:

We also got revised outlook for inflation and a warning from Draghi that inflation can be low or that we might yet see deflation. ECB now projects HICP inflation at 0.1% in 2015 (previous forecast was 0.3%), 1.1% in 2016 (previous forecast at 1.5%) and 1.7% in 2017 (previous forecast was 1.8%). Which means that the ECB is still sticking to the miracle of "close to 2% inflation a year after next" target. Of course, both sets of revisions mean that declines in forecast growth in nominal incomes are going to be sharper than in real GDP. Which means euro area will get less income, more prices. That, presumably, remains the 'good side of inflation' in ECB's mind.

Draghi warned that the 'there are downside risks to September inflation projections'. Now, who could have guessed as much, given that I posted recently the 5yr/5yr swaps chart clearly showing that euro area inflation expectations in the markets have gone soft once again. Shall we repeat that again?

Source: @Schuldensuehner

Draghi's job today, however, was to talk down the euro. Which he did by simply stating that QE will be running at planned rate (EUR60bn purchases) through planned timeline (to September 2016) and can be extended and expanded if the need arises. Promptly, Euro dropped like a rock.

In a typical, by now ritualistic, referencing of the monetary policy transmission mechanism (still broken), Draghi referenced improved, but still poor credit conditions for euro area corporates. Chart illustrates:

Of course, there is little point of reminding all that growth in credit requires growth in demand. Unless, that is, you are a European policymaker who thinks (as they all seem to be required to do) that issuing loans to companies is a great idea to generate economic growth even if there is absolutely no need for new capacity creation in the economy with stalled demand.

In short, ECB has now reacted to the rot in the Emerging Markets (and in particular China). This is a reactive move with some serious wisdom behind it - the rot is not over yet, by all means and the ECB is out of the gates with signalling that it will continue priming the Government bonds markets pump to prevent any spiking in the rates or euro revaluations derailing already weak exports. With BRIC PMIs signalling ongoing and deepening deterioration in global growth conditions (link here), this is expected and wise. For now, doing nothing new, but promising to do it longer and more aggressively is the preferred response from Frankfurt. It might just be enough.

3/9/15: BRIC Composite PMI: August

Having covered Manufacturing (link here) and Services PMIs (link here) for BRIC countries, consider Composite PMIs next.

Note, to make series consistent with my previous indicator, I use x2 factor on composite PMI readings from Markit, going forward, so reference number here is not 50.0 but 100.0.

• Brazil Composite PMI firmed up marginally to 89.6 in August from 86.3 in July. This is the fifth highest reading in recent months, but sixth consecutive reading below 100. Per Markit: "Rising to a five-month high… the Brazil Composite Output Index pointed to a further, although weaker, decline in private sector output. Whereas manufacturing production decreased at a quicker rate, the reduction in service sector activity softened. … New business in the Brazilian service sector decreased for the sixth straight month in August. …Order book volumes at manufacturers dipped at the fastest pace in four years. Subsequently, the contraction in total private sector new work accelerated to the sharpest in three months."
• Russian Composite PMI was also soft, falling to 98.6 in August compared to 101.8 in July, returning the economy toward renewed recessionary momentum after fragile improvement in the first month of 3Q 2015. More on Russian Composite PMI here: http://trueeconomics.blogspot.ie/2015/09/3915-russian-manufacturing-services.html.
• China Composite PMI too posted sub-100 reading, falling to 97.6 in August compared to 101.6 in July. Per Markit release: "Though only modest, it was the fastest contraction of output seen since February 2009. The renewed decline in overall output was largely driven by a faster contraction of manufacturing production in August. Furthermore, the latest fall in manufacturing output was the quickest seen in 45 months. Meanwhile, slower growth in service sector business activity also weighed on the headline index. Consequently, total new business at the composite level fell for the first time since April 2014, albeit marginally. ...the latest expansion in service providers’ staff numbers was the weakest seen in the current two-year sequence of job creation and fractional. Job shedding persisted at manufacturing companies, with the pace of reduction quickening slightly since July. Overall, composite employment fell for the third month in a row and at a modest pace."
• India Composite PMI firmed up to 105.2 from 104.0 in July, marking improved growth outlook for the economy and breaking, once again, trend with the rest of the BRICs. Per Markit: "India’s private sector economy improved further in August. The seasonally adjusted Nikkei India Composite PMI Output Index rose to a five-month high… The uptick in growth was boosted by a quicker expansion of services activity, as the increase in manufacturing production softened in August. …New business across the private sector as a whole expanded at a moderate pace that was the quickest since March."

SUMMARY: As charts above show, BRICs as a block are now exerting negative drag on the global economy. This is extremely worrying especially as the core drivers for this weakness are now China and Brazil, opposed to Russia. While Russian economy remains in a recession, overall, it is responsible for lesser share of negative momentum in the BRICs index than the other two troubled economies since around the start of 2Q 2015.

3/9/15: BRIC Manufacturing PMIs: August

BRICs manufacturing PMIs signalled continued worsening in growth conditions in world's largest emerging markets.

• Brazil Manufacturing PMI fell to an abysmally low 45.8 in August compared to already poor 47.2 in July. This marks the fastest rate of decline in manufacturing activity in the economy since September 2011 and the 7th consecutive month of sub-50 readings in the index.
• Russia Manufacturing PMI fell to 47.9 from 48.3 in July, marking 9th consecutive month of sub-50 readings and worst performance in the sector since May 2015. August move effectively demolished previous expectations of stabilisation in Manufacturing sector in Russia. In my previous posts on the subject I have consistently noted that early signs of such stabilisation were yet to be fully confirmed and we will have to wait until we see Services PMI for Russia for more analysis.
• India Manufacturing PMI continued above-50 trend performance in August, although the index did fall to 52.3 from 52.7 in July. Statistically-speaking, 51.5 for the Indian economy is consistent with moderate growth. Overall, Indian Manufacturing PMIs have now been in continuous expansion territory over 22 consecutive months.
• China Manufacturing PMI came in at a disappointing 47.3 in August, down on already poor 47.8 in July, marking 6th consecutive month of contraction in the sector. Overall, August reading is the lowest since March 2009. The trend suggests the economy is nowhere neat the target of 7% annual growth rate targeted by the Beijing officials.

Summary view: Overall, BRIC Manufacturing PMIs signalled deepening of the ongoing economic growth slowdown in the largest emerging economies. We will need to wait for the analysis of Services and Composite PMIs to confirm this, but August has been a disappointing month for the prospects of global growth recovery.

28/8/15: Central Banks' Activism in a Chart

Having been out of contact due to work and summer break commitments, I will be updating the blog over the next few days with interesting bits of information that have been overlooked over the last 10 days or so. So stay tuned for numerous updates.

To start with, here is a picture of the Central Banks' monetary activism to-date:

Source: @Schuldensuehner 

The chart above sets 2005 = 1000 and indexes the uplift in Central Banks' balancesheets expansions: Fed almost x5.6 times; PBoC almost x6.4 times, ECB almost x2.3 times and heading toward x3.3 times under the ongoing QE, BoJ almost x2.1 times... not surprisingly, the old Fed 'put' is now pretty much every Central Bank's default option...

Much of this mountain of money printing has gone to grease the wheels of sovereign debt markets. Much of the resulting revaluation of financial assets is simply not sustainable under the premise of the Central Banks' 'puts' withdrawal (monetary tightening).

In simple terms, the ugly will get uglier and we have no idea if it will get any better thereafter.