There used to be a time when US manufacturing set the pace for the entire world, and was the leading indicator for growth in developed and emerging economies around the globe. Unfortunately, in the days of the New Normal, this indicator has lost its potency, and has been replaced by the only variable that currently matters: which central bank is injecting the most credit money into a fungible, globalized marketplace (where for some reason analysts continue to confuse the economy with the centrally-planned market). Still, what the US does has reverberations around the world. Which is why the following chart showing MarkIt manufacturing index (PMI) data for the world's countries may be troubling. Despite hitting a global two year high of 51.8 in September, the key US subcomponent has been on a downward slope since the start of 2013.
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Which leads to the question: how much longer can manufacturing for the rest of the world rest on the shoulders of China where the recent resumption of liquidity injections following the banking sector's cardiac arrest in June, managed to pull out Europe and the rest of the world out of a manufacturing/exporting rut. Especially if, as in the past, Chinese "demand" is merely a function of the rate of leveraged growth in the country [6]. And with Chinese credit continuing to hit new destabilizing record highs, it is only a matter of time before the PBOC reruns the entire deleveraging exercise once more, and the yellow and red blocks in the chart above return with a vengeance.