Quick Take | Flash PMI data show two-speed global economy

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The Flash data for the Purchasing Managers' Index for January, an early take on the state of the economy before the final PMI data, are now out. It shows that growth is strong in the United States, spluttering in the Eurozone, while it’s flat-lining for the manufacturing sector in Japan.

For the PMI numbers, a reading above 50 denotes expansion from the previous month and the Composite Flash PMI for the US came in at 54.5, which indicates a solid rate of expansion. In sharp contrast, the Composite PMI for the Eurozone was at 50.7, a five and a half year low. In Japan, the flash manufacturing PMI for January was at 50, which means it neither expanded nor contracted from the previous month. In short, the PMI data seem to indicate a two-speed global economy, with regions such as the US continuing to grow robustly, while Europe and Japan slide.

The December 2018 PMI numbers showed that global growth slowed to a 27-month low. Nevertheless, the press release also said, ‘National PMI data indicated that the US remained one of the best performers, despite seeing its rate of output growth ease slightly from November. Above global average rates of expansion were also seen in Spain, India, Russia, Australia and Ireland.’ Recall also that the International Monetary Fund recently forecast lower global growth and cut its growth rate prediction for China, but said growth in India will accelerate.

The PMI data suggest that while global growth is slowing, some countries have so far bucked the slowdown trend. How long that will last is the question.