Global Manufacturing Update Indicates 80% Of The World Is Now In Contraction

Tyler Durden's picture

With the US closed today, the rest of the world is enjoying a moderate rise in risk for the same old irrational reason we have all grown to loathe in the New Normal: expectations of more easing, or "bad news if great news", this time from China, which over the weekend reported the first official sub-50 PMI print declining from the magical 50.1 to 49.2, as now even the official RAND() Chinese data has joined the HSBC PMI indicator in the contraction space for the first time since November. Sadly, following today's manufacturing PMI update, we find that the rest of the world is not doing any better, and in fact of the 22 countries we track, 80% are now in contraction territory. True, Europe did experience a modest bounce from multi-month lows of 44 in July to 45.1 in August (below expectations of 45.3), but this is merely a dead cat bounce, not the first, and certainly not the last, just like the US housing, and now that China is officially in the red, expect the next shoe to drop in Europe. Also expect global GDP to eventually succumb to the manufacturing challenges faced by virtually every country in the world, and to post a negative print in the coming months.


And charted via MarkIt:

Some narrative to go with the pretty pictures via Reuters:

The downturn that began in the smaller periphery members of the 17-nation bloc is now sweeping through Germany and France and the situation remained dire in the region's third and fourth biggest economies of Italy and Spain.


"Larger nations like France and Germany remain in reverse gear... the (manufacturing) sector is on course to act as a drag on gross domestic product in the third quarter," said Rob Dobson, senior economist at data collator Markit.


Markit's final Purchasing Managers' Index (PMI) for the manufacturing sector fell from an earlier flash reading of 45.3 to 45.1, above July's three-year low of 44.0, but notching its 13th month below the 50 mark separating growth from contraction.


"The rate of decline was a little slower than in July, providing some heart that the manufacturing downturn may be easing, but the sector is on course to act as a drag on gross domestic product in the third quarter," Dobson said.


Having contracted 0.2 percent in the three months to June the bloc's economy is seen posting similar results in the current quarter, with no growth expected until the start of next year.


In its battle to support an economy ravaged by a two-and-a-half-year-old debt crisis, the European Central Bank is now widely seen cutting interest rates to a new record low of 0.5 percent - either on Thursday or next month.


The output prices index fell from the flash reading of 48.9 to 48.6, above July's 48.3. The input costs paid by factories also fell for the third month.


Factories in Germany, Europe's largest economy, and France - the second biggest - saw activity fall for the sixth consecutive month although both saw an easing in the decline.


In Italy the main index (43.6) has now been below the break-even point for over a year and was worse than economists had predicted while in Spain it has been sub-50 since May last year.


The latter two countries are deep into austerity programs which are aimed at bringing their debt piles under control but also keep their economies stuck in recession.


They are looking for the European Central Bank help them escape this vicious circle by buying debt issued by their governments to bring down borrowing costs.


"The national picture remains one of widespread contraction, only Ireland saw manufacturing output rise. The situation in Italy is also becoming more of a cause for concern, as it falls further down the PMI league table," Dobson said.


The output index for the sector, which drove a large part of the bloc's recovery from the last recession came in at 44.4, below a flash 44.6 but above July's 43.4.

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midtowng's picture

Don't worry because China is going to bail us out and the Fed is going to print. Thus we have nothing to worry about forever and ever.

LikeClockwork's picture

Workers at Jameson's distillery having to doubleshift.

LawsofPhysics's picture

"Drinking is the curse of the working class"- Oscar Wild.

falak pema's picture

Priapism is the curse of the upper class...what a way to go! They all wanted to be like him, even today!

Hubris and sex make good bedfellows; Oscar was Wilde about it too! The importance of being earnest...had a double meaning, the second tongue in cheek! 

Priapus - Wikipedia, the free encyclopedia

merizobeach's picture

"Working is the curse of the drinking class." :-)

MillionDollarBonus_'s picture

The US has a consumer economy, so this is of no concern to us. The strong dollar will allow us to consume well in excess of what other countries are capable of consuming. Demand for dollars is just off the charts ... It seems like almost every week now that the 10 year yield makes a new all time low. And despite what the doomer libertarians say, treasury yields are NOT "manipulated" by the Fed. On Friday, Bernanke specifically mentioned that he woul not be committing to further treasury purchases, and the 10 year yield closed down on the day. Investors simply cannot get enough of our debt, and doomer libertarians need to realize this.

EscapeKey's picture

Meh, 3/10 - one of your weaker ones.

Bernanke left the barn door wide open for further purchases, and anyone who even browsed the headlines would know this. Gold rocketed Friday, in case you forgot already.

LoneStarHog's picture

Yields NOT manipulated? Then please explain the EXPLOSION of IRSwaps!

LawsofPhysics's picture

Weak post MDB.  You can do better, especially since all of friday's events are so fresh on everyone's mind and directly contradict your statement.  You satire is better when it is more subtle.

LoneStarHog's picture

Will you pahleeze stop hitting the UP ARROW on your own damn posts?

Zero Govt's picture

MDB  -  so you've bought loads of US Govt debt, like the Fed, sorry foreigners, yes? 

teahouse's picture

Strong Dollar?!? 

Have i miss a party?? or you drink by yourself??

ozziindaus's picture

You don't think it's holding its own? What would you prefer?

ozziindaus's picture

Don't worry MDB, every time someone speaks sense on this site, he/she gets clobbered by those who refuse to believe or lack the understanding of the largest  and most liquid assets, US bonds and USDs. 

Bottom line, so long as the US has the reserve currency and largest guns, it will always remain a safe haven in troubling times. I'll bet that the hatred/ignorance people have for the dollar and bonds is costing them money through missed opportunity or mal-investments.

BandGap's picture

I, for one, know what happens as these contractions get closer and closer!

ozziindaus's picture

On the contrary IMO. China will continue to self destruct and be faced with a currency crisis like no other. its debt will be paid back literally with pennies on the dollar. 

As much as I hate US politics and it's corrupt banking cartel, it remains a master in self preservation. The FR is no exception for it will save itself and its member banks before it saves the economy or its political position.

Wolferl's picture

Good news. QE X coming. Go long everything.

Zero Govt's picture

Bubble Ben reacts to situations (ie. is dictated to) rather than is pro-active

he's not known as Ben 'blind-as-a-bat' Bernanke for nothing!

Ben will react with money printing (his one and only policy option) when the next bwanker needs a bailout or the goon squad in DC come running with begging bowls

it has nothing to do with the economy or unemployment, they're just public mandates (follies) to shrowd the role of the Fed is to keep the Parasite Club afloat at societies expense (hence rising unemployment and declining economy which are the bills for rampant corruption)

AvoidingTaxation's picture

The dustopian new wolrd, where everything is also his contrary.

bezell's picture

Except for the Middle East(OIL) everybody will have to print....BUY PM

spanish inquisition's picture

South Africa should drop off with the mining strikes. Of course they will need to buy alot more bullets. Unless someone has a bunch they can lend them......

JustPrintMoreDuh's picture

I hear the DHS just might have a few to spare ...

LawsofPhysics's picture

So fucking what?  Let's be optimistic and say that the world becomes an efficient producer of things of real value like Germany,  Who the fuck would the earth be selling to?  Mars?

The problems the earth is facing, and what TPTB don't what you to realize is that they continue to steal the value of your labor through the manipulation of the fiat monetary system.  There is also an underlying energy problem and the problem of unchecked  moral hazard.

One reason why Nature has been so successful is because there have always been real fucking consequences for bad choices or bad behavior.

Where the fuck is John Corzine? Nothing changes until the moral hazard has been addressed and we all have an adult conversation about what real fucking value is.  In the meantime, anyone know of an ETF for the black markets?  This is the only place that you will see "growth" for the foreseeable future.

LoneStarHog's picture

No one wants to hear and understand about the system of Federal Reserve Notes.  No one! Gawd knows I have tried.  There is only one solution that will wake up the masses:  Total Collapse! Then and only then can this fraudulant system be rebuilt, from scratch.

HardAssets's picture

Your experience matches mine. I even tried to make it super easy & bought DVDs with a 20min cartoon explaining the money situation, and people didnt want to watch that.

Its a combination of the human tendency for denial - - and the fact that most people aren't Big Picture, long term thinkers. They focus on the immediate, hands on, and what they consider 'practical'.

IMO you just keep putting the info out there. When things crash, some of it may stick.  (People I have spoken to and had blank looks on their faces when I spoke to them about the economy later bought themselves PMs. I only found out about it later. - - They may not understand all the technical details - - but know something is not right.)

Zero Govt's picture

understand people are primarily flight (risk averse) animals, not fight... why would they rock the boat when they're in it?

...given there's no (attractive) alternative available on the money market as the Fed scum have shuttered competition with its State monopoly

the people will 'put up' with the encumbent until it fails, then when people have been damaged they'll seek revenge of some sort and be open for change

what i don't get is the quiet as church mice creditors of MF Global and why they haven't linched the gambling junkie

sun tzu's picture

Collapse usually results in chaos and violence followed by a totalitarian regime taking over. The PTB won't be the ones suffering. 

Schmuck Raker's picture

Why so glum, chum?

At least there is plenty of food and fresh water for everybody.

Svendblaaskaeg's picture

"Who the fuck would the earth be selling to? Mars?"



Then suddenly a clue turned up in Scotland. Mr Angus Podgorny, owner of a Dunbar menswear shop, received an order for 48,000,000 kilts from the planet Skyron in the Galaxy of Andromeda.

Mrs Podgorny: "Angus how are y'going to get 48,000,000 kilts into the van?" 

Angus: "I'll have t'do it in two goes."


LoneStarHog's picture

Shrinkage! Everyone outta da pool.

HardAssets's picture

Only 80% in contraction ?   Where's the other 20 % ?

"Hookerville for Banksters ?"

LoneStarHog's picture

The porn industry is one example that will always thrive; at least until we take away the computers from federal regulators like the SEC, CFTC, DOJ, FBI...

Hookers will also do well as long as the Secret Service is allowed to travel.

sun tzu's picture

Porn industry is collapsing due to internet piracy. Why pay $40 for a DVD or monthly membership when you can downoad it for free?

Duke of Con Dao's picture

global economy, tower of Babel... it's the same thing really 

and since both are based on man's supreme arrogance

it was only a matter of time before they both collapsed, no?

YouTube - Tower of Babel? You didn't build that!


Debeachesand Jerseyshores's picture

Let me get this straight,the PMI has been below 50 for sometime,but the Euro is rising for hopes that the impotent ECB will bail the EuroZone out.

Must be that "New Realty" I keep reading about that's behind this "wet dream".

RiskAverseAlertBlog's picture

Yes, but pot fields are flourishing with a resinous bloom likely to keep the banking system afloat so long as student loan securitizations remain a growing, going concern.

three chord sloth's picture

Biggest loser (so far)... Sweden. PMI drops from 50.6 to 45.1

paulie's picture

That's what happens when a PIIG stops purchasing because s/he has to pay more taxes to honor her/his debt.

Print Mario, print little plumber !!

giddy's picture

...seems that all economic activity is (in the most basic terms) a function of momentum.  At this juncture momentum is on the down-side.  The value-proposition is seeing opportunities within these circumstances.  Most economists and financial "experts" are only capable of dealing with life in a "growth" or expansion scenario.   For individuals and economies to prosper in spite of directional momentum requires an ability to 1) untangle the snarls and 2) see/execute opportunities.   It takes honesty and fearlessness.  Willingness to leave the old for the new -- and not look back.  Our ancestors did that to come here.  It's part of the American DNA.  Now is the time we prove it.  

LawsofPhysics's picture

To use your own language, the fundamental problem that must now be undone has to do with the moral hazard.  I see plenty of people claiming to be "leaders", yet only if they can be gauranteed a good outcome funded by the taxpayer.

Failed leaders, failed management, failed business models, all need to be kicked to the fucking curb.  This is the fundamental problem.  There have not been any real consequences for bad behavior, especially in the financial sector.

What you are now asking is that the people in power and control indict themselves.

Will not happen.

q99x2's picture

Finally people everywhere are finding time to meditate, exercise, read, write, dance, make love and play musical instruments. Let us not forget the extra hours to sleep a little too

walcott's picture

More like 100% decline with extreme prejudice.

Global Marxism with beheadings and wholesale mass murder of children,  ain't it great?

And imagine if everyone of the assfuckers who are responsible received a peace prize like T-ball?

Then the entire human race would finally be eradicated. And it feels really good because you

know deep down that gee golly they're doing all of this because they really love you.

Global peace through global annihilation - Globalism.


blunderdog's picture

I thought the finance guys have already demonstrated that you can continue to grow an economy indefinitely.  It just takes creation of new credit.

"We're gonna need a bigger loan!"