'Global Synchronous Recovery' Narrative Crushed As US, EU PMIs Plunge

Following the collapse of Europe's Composite PMI (to 14-month lows), US Composite PMI slipped notably from one-year highs. So much for the 'global synchronous recovery' narrative.


Commenting on Europe's flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“While the first quarter average PMI reading remains relatively robust, indicative of GDP rising by 0.7-0.8%, the loss of momentum since the buoyant start to the year has been quite dramatic.

“At least some of the slowing may be ascribed to bad weather in some northern regions and, perhaps more importantly, ‘growing pains’ resulting from the strength of the recent growth spurt. Supply chain delays and raw material shortages were often reported to have stymied production in manufacturing (delays in German supply chains are currently more widespread than at any time in the survey’s 22-year history), and both manufacturing and services sectors also saw activity being curtailed by growing incidences of skill shortages. Backlogs of work continue to rise as a result of these growth constraints.

“However, other factors are clearly at play. The fact that export order book growth has more than halved since the end of last year suggests the stronger euro is taking an increasing toll on export performance. Survey responses also highlighted how political uncertainty also appears to have intensified, dampening demand.

The data therefore suggest that eurozone growth peaked around the turn of the year and the region is settling into a slower, but still robust pace of expansion. Price pressures have meanwhile also eased slightly, in part linked to cheaper imports arising from the euro’s recent strength, but remain elevated.”

In the US the picture was a little more mixed as the Services sector plunged but manufacturing jumped to a 3 year high (even as manufacturing output hit a 4 month low)...


Commenting on the US flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The flash PMI surveys indicate that the economy likely continued to expand at a robust pace in March, rounding off a solid opening quarter of the year. The surveys are running at a level consistent with annualised first quarter GDP growth approaching 2.5% (though we note that official GDP estimates may once again understate growth in the opening quarter of the year).

“The survey’s employment index is meanwhile at its highest for nearly three years and indicative of another strong payroll rise in the order of 240,000 in March.

“The improved hiring trend reflects buoyant optimism regarding future growth. Companies’ expectations for output in the year ahead remained elevated, dipping slightly in services but surging to a three-year high in manufacturing.

Inflationary pressures meanwhile remain a key theme of the surveys, especially in manufacturing, reflecting increased raw material prices, notably for metals. The survey found average prices charged for goods and services are rising at one of the strongest rates seen since 2014. Furthermore, with factory costs showing the largest jump for seven years amid growing shortages of key inputs, inflationary pressures appear to be on the rise.”

Stagflation anyone?