Purchasing managers index (PMI) reports from the U.S., euro zone and Asia Wednesday signalled continued deterioration in the global economy.
U.S. PMI was reported at 49.8 for July, below the 50 level that signals economic expansion for the second consecutive month. Domestically, the RBC Canadian manufacturing PMI Index showed a month over month decline in manufacturing growth, although the 53.1 survey result indicates continued expansion.
PMI results for Europe as a whole were in-line with pessimistic expectations while readings for China, South Korea and Japan fell short of estimates. The Australian economy, focused on resource exports, produced a stunning drop in manufacturing activity.
PMI surveys are key data points for economists. The weak results have clear negative implications for export-dependent Canadian industry sectors, notably mining and energy.
The PMI index is a survey of large manufacturing firms. Managers are asked for business conditions in production, new orders, supplier deliveries, inventories and employment, with responses limited to “better”, “same” or “worse”. An index reading below 50 indicates contraction, a decline in activity.
The euro zone PMI was reported at 44, in line with economist estimates but well below the 50 mark that would signal economic growth. The euro zone remains the world’s largest trading block by GDP, and the slowdown has peripheral effects throughout the global economy.
Manufacturing data from Australia was notably wretched. The Australian Industry Group/PriceWaterhouseCoopers PMI plummeted 6.9 index points to 40.3 in July with all sub sectors except food and beverages showing sharp declines.
Like Canada, Australia’s focus on resources has produced outsized economic growth rates as China’s demand for commodities climbed. The sharp decline in manufacturing activity is an unfortunate harbinger for the Australian economy.
PMI readings throughout Asia indicated slowing economic growth. China’s PMI at 50.1 was moderately below expectations, barely indicating economic expansion. The South Korean survey indicated contraction at 47.2.