Growth and Activity

Global PMIs flattening off at high levels

The main takeaway from today’s batch of manufacturing PMIs is that industrial output growth looks to have peaked. Output indices have generally stopped rising, and new orders indices have come off the boil. Even so, with supply unable to keep up with demand, price pressures show little sign of abating.

2 August 2021

Asian industry struggles, strong recoveries in EM Europe

June’s PMIs show that virus outbreaks have weighed on manufacturing in Southeast Asia while supply bottlenecks and weaker demand created headwinds for industry in China. In contrast, Indian industry rebounded sharply and manufacturing recoveries continue strongly in most of Emerging Europe. Supply disruptions are continuing to exert upward pressure on prices in the latter. China slowdown webinar: Join us on Thursday, 5th August for a special webinar assessing the impact of China’s economic slowdown on the global recovery. Neil Shearing will lead a discussion with economists from across our economics and markets services to assess whether investors should brace for fresh volatility with China poised for a structural deceleration. Register here for sessions at 0900 BST/1600 HKT or 1100 ET/1600 BST.

2 August 2021

We expect China’s bond market to diverge from those elsewhere

We think China’s long-term government bond yields will continue to fall as the country’s economy slows further, even if yields rebound elsewhere.

2 August 2021
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ISM Manufacturing Index (Jul.)

The further small decline in the ISM manufacturing index in July probably has more to do with the continued drag from supply constraints than waning demand. The details did at least suggest that supplier delivery times and the accompanying upward pressure on prices may have peaked. But we suspect it will be a long time before supply constraints ease meaningfully.

South Africa Manufacturing PMI (Jul.)

South Africa’s manufacturing PMI tanked in July as activity was hit by violent unrest and tighter virus containment measures. And while activity is likely to rebound this month, South Africa’s recovery is likely to continue to lag behind other major EMs.

What would a hard lockdown mean for Japan?

With the Delta variant lifting new infections to a record-high, calls for a “hard” lockdown are growing. If that happened, services activity would fall further but we doubt that the government would shut down industry. And with households and firms now better prepared to deal with virus restrictions, it seems likely that GDP wouldn’t revisit last year’s lows.  

Manufacturing PMIs (July)

The PMIs for July suggest that supply chain disruptions weighed on output in Czechia and Poland and continued to put upward pressure on prices. Meanwhile, the releases suggest that manufacturing demand softened in Russia but strengthened in Turkey. The recent rise in new virus cases in the latter is a concern.

Switzerland CPI & Manufacturing PMIs (Jul.)

While inflation in Switzerland is likely to rise further in the coming months, the anticipated bout of re-opening inflation may have already passed, and the SNB will not be fazed.

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