Monday, September 05, 2011
Markit PMIs - August (Crying, Wailing, Whimpering)
Brazil: The composite PMI fell to 49.6 in August. Services in Brazil have held pace during the summer, although August services fell a bit to 52.2 from 53.7 in July. But manufacturing was so bad that it took the combined index to contraction in August. Input prices are still rising in Brazil.
Eurozone: Germany and France are pretty well carrying it, but they are having problems dragging the region along. Composite for August was 50.7, which is a drop from the earlier estimate, and certainly doesn't provide much margin. The contractions in Italy and Spain are accelerating. Germany's growth rates are weakening. It is quite strange to look at the output index graph and see Germany's line crossing Ireland's.
Germany: The composite index fell to 51.3 in August from 52.5 in July. Services fell to 51.1 from 52.9 in August. I guess it's time to put on the Wagner and start reading the Bundesbank's monthly reports again. Look at the graph on Germany's earlier manufacturing PMI - Germany is an economy dependent on exports, like Japan and China. The sharp rise in finished inventory reported in August does not bode all that well for the next few months!
Russia is slowing but staying in the expansion zone. But August did see some sharp drops in the outlook numbers.
No services numbers for Turkey yet, but in August earlier-reported manufacturing PMI shifted to contraction, dropping to 48.8 from July's 52.3..
Moving to Asia:
India: The composite falls to 54.5 from July's 57.9. While the current number is good, this takes us to levels not seen since the end of the global recession in 2009. Employment fell. Domestic demand in services seems to be holding, but export orders aren't. Costs and prices charged are still rising quite steeply! India's manufacturing PMI has been declining for four months, although at 52.6 it was still solidly expanding in August. However input costs keep jacking up there also.
Hong Kong: Like Singapore, this economy tends to be an Asian leading indicator due to the edge effect. Singapore's GDP contracted in Q2. Hong Kong appears to be following - the composite index fell to 47.8 from July's 51.4. Comments indicate that demand from China is holding, but western demand is not. Input prices are still rising, but the rate of increase is beginning to fall quite noticeably.
China: Composite 50.4, the same as July. Services at 50.6. This, again, is at levels not seen since before the end of the global recession in 2009. Input costs are rising quite sharply - but much higher than the current rate of output charges. Something's going to break soon.
Japan: Services fell to 44.3 from July's 45.3. Manufacturing is still rebounding from the effects of the quake/tsunami disaster, but the Composite index fell to 46.7 in August, which is the fastest rate of decline since May. Under the circumstances, that is daunting! Input costs are controlled to declining. It is likely that the strong yen is cramping Japan's export business enough to drag down the whole economy. This number makes it just about impossible that Japan will emerge from recession this quarter.
Notes on all this: This is an eerily familiar replay of 2008. By October, it appears the global situation will have taken another step down, following the decisive negative moves of the summer.
Italy cannot comply with the austerity measures demanded by the ECB as the condition for continued bond purchases, because it is heading into another recession. Italy's real problem with its bonds was the decline in fiscal outlook from highly negative fundamental economic data earlier, and now it appears that the European sovereign/banking crisis is not set to abate. The summer's weakness is now translating into pain for many service-oriented economies (see the UK's August performance), and surely will bleed through into additional slackness for the US economy.
We now appear to have entered the cycle of self-reinforcing weakness in the global economy.
"We now appear to have entered the cycle of self-reinforcing weakness in the global economy."
Here's a chart that supports your theory.
It strikes me that the article sounds very much like the boom-bust cycle experienced by most ancient civilizations, but especially the "hydraulic" societies of Mesopotamia. Basically, the society gains power based on agriculture (plus manufacturing in California's case). Their urban classes grow in power and wealth, and begin ordering society and the economy to suit their tastes. In the end, everybody is working to supply the ruling classes with fashionable goods while neglecting the stuff that brought them wealth in the first place, and everybody starves.
I wonder just how much of Mark's "missing jobs" can be chalked up to California alone?
Mark's "missing jobs"
I have this uneasy feeling that I am about to be added to the scapegoat list. ;)
Obama's Scapegoat Checklist
Guys, I'm too depressed to blog. At first I thought Services PMI today would be a bit of a lift, but then I made the mistake of reading the report. Order backlogs still contracting, inventory sentiment too high.
Change and uncertainty makes it very difficult. Nor can Obama ever seem to stop hiring economists and other counselors with all these great, wonderful revolutionary ideas that have nothing to do with reality. It's like an addiction - he just can't stop.
"No, Mark, they're sending O.J. out to find the missing jobs. Don't worry, the mystery is about to be solved."
A mystery is about to be solved? Oh no!! You are not easing my concerns! ;)
"It would have worked, too, if it weren't for those meddling bloggers!"
Calif Ag and water is an old story, the area around Salinas is prime time field Ag but the water driving the business is pumped ground water. The Ag business is simply outstripping the ability of the underground water supply to replenish and this goes back several years. The fact that the Mayor of Salinas is taking this route tells you that the problem has reached epic portions since Ag runs Salinas and is the areas largest employer. I looked into this area back in the late 90's looking for vineyard property, even then those in the Ag business were concerned that the Aquifers had serious problems and could not be counted on for the business long term water supply,so most discussions were centered on building canals from northern Calif but nothing ever came of it.
Urban growth has taken a bit but the overall Ag business growth including wine planting which has been significant is out stripping ground water supply,no surprise.
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