PMI orders weakness abating on schedule
Simon Ward
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A post in July suggested that global economic momentum would trough in autumn 2012 and revive into year-end, based on a recovery in real narrow money expansion from a spring low. Manufacturing purchasing managers’ surveys for September are consistent with this forecast: a weighted average of G7 PMI new orders rose for a second month, with the increase confirmed by a recovery in the equity analysts’ revisions ratio – see first chart.
A stronger G7 new orders reading had been signalled by a revival in Korean manufacturers’ expectations in August – Korean industry is a bellwether of the global economic cycle. This recovery, noted in a post a month ago, extended in September, increasing the probability that the turn in the G7 orders measure is genuine – second chart.
Early data had suggested that global six-month real narrow money expansion would fall back in August – see here. Eurozone and UK statistics released over the last week, however, have resulted in this decline being revised away – third chart. With US weekly numbers strengthening, the global real money growth measure could rise again in September, implying that the forecast economic upswing should last at least through March 2013, allowing for the usual six-month lead.
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