Economic Overview - May 2013

7/30/2019 Economic Overview - May 2013

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The Science of FinanceThe Science of Finance

Monthly economic overviewMonthly economic overviewMay 2013: Global economy sees subdued start to second quarte


2/12

Global economic growth slips to six-month low

Having held up well in Q1 to signal a rate of global GDP growth that was much improved on the threeHaving held up well in Q1 to signal a rate of global GDP growth that was much improved on the three--year low of 1.4%year low of 1.4%

,, -- ..

volumes have risen over the past two months, but manufacturing growth remains disappointingly weak andvolumes have risen over the past two months, but manufacturing growth remains disappointingly weak and easedeased in April.in April.

Meanwhile, subdued demand in many countries caused growth of service sector activity to slow to the weakest for tenMeanwhile, subdued demand in many countries caused growth of service sector activity to slow to the weakest for ten

..

Global PMI and economic growthGlobal PMI and economic growth Global tradeGlobal tradeGlobal PMI Manu. Ex orts Index Global Manufacturin Ex orts / %

60

65

5.0%

7.0%

57

62

20%

30%

50

55

1.0%

3.0%

47

52

0%

10%

40

45

-

-3.0%

-1.0%

Global PMI Output Index

Global GDP

37 -20%

-

PMI Exports Index

Global exports

\ 2'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

.

'98 '00 '02 '04 '06 '08 '10 '12

-


3/12

Among the major developed countries, the US continued toAmong the major developed countries, the US continued to

US leads developed world economic expansion, while the eurozone floundersUS leads developed world economic expansion, while the eurozone flounders

PMI Output Index (manufacturing & services)

see the strongest pace of growth, despite the rate havingsee the strongest pace of growth, despite the rate having

slowed sharply compared with the start of the year.slowed sharply compared with the start of the year.60

Growth also eased in J apan, though remains in recoveryGrowth also eased in J apan, though remains in recovery

mode compared to the stagnation seen in the fourth quarter.mode compared to the stagnation seen in the fourth quarter.

50

Growth in the UK meanwhile improved to register theGrowth in the UK meanwhile improved to register the40

45

UKEurozone

strongest upturn s nce t e ympcsstrongest upturn s nce t e ympcs--re ate oost astre ate oost ast

August.August.30

35US

J apan

Developed world PMIsDeveloped world PMIs

In contrast, an ongoing deep recession continued to beIn contrast, an ongoing deep recession continued to be

recorded in the eurozone.recorded in the eurozone.

\ 3


4/12

Measured across all emerging markets covered by the PMIs,Measured across all emerging markets covered by the PMIs,

Signs of stalling growth evident across the largest emerging marketsSigns of stalling growth evident across the largest emerging markets

65

PMI Output Index (manufacturing & services)

output rose at the slowest rate since September 2011,output rose at the slowest rate since September 2011,

registering the secondregistering the second--weakest performance seen in the lastweakest performance seen in the last

60

four years.four years.

Growth slowed to a sixGrowth slowed to a six--month low in China, while rates ofmonth low in China, while rates of

50

expansion were the weakest for a yearexpansion were the weakest for a year--andand--aa--half in Indiahalf in India

and Russia. Brazil was the only BRIC economy to registerand Russia. Brazil was the only BRIC economy to register40

45

China

India

faster growth in April, but even there the pace of expansionfaster growth in April, but even there the pace of expansion

remained weak.remained weak.30

35Russia

Emerging market PMIsEmerging market PMIs

Worryingly, stalling or weakened service sector growth pointsWorryingly, stalling or weakened service sector growth points

to a lack of growth of domestic demand in the worlds biggestto a lack of growth of domestic demand in the worlds biggest

\ 4emerging markets.emerging markets.


5/12

S Korea tops manufacturing rankings, while France displaces Greece at bottom

South Korea pushed the US into second place at the head of the manufacturing PMIs league table in April. J apan wasSouth Korea pushed the US into second place at the head of the manufacturing PMIs league table in April. J apan was

, . ,, . ,

and Germany slid further down. In terms of manufacturing exports, the growth rankings were led by the UK for the firstand Germany slid further down. In terms of manufacturing exports, the growth rankings were led by the UK for the first

time in the global PMI series history, followed by South Korea and J apan.time in the global PMI series history, followed by South Korea and J apan.

55

March

April

Manufacturing PMI

50

45

40 Fra

Sp

Gre

Ital

Pol

Au

Irel

Ger

Net

De

Cz

UK

Ca

Swi

Chi

WO

So

Ru

Tai

Bra

Vie

Indi

Jap

Tur

Ind

Me

US

SK

\ 5

ce

in ece

nd

triand

many

herlands

mark

chRep.

ada

tzerland

a RLD

thAfrica

sia an

zil

nam

a an ey

nesia

ico

orea


6/12

No end in sight to Fed stimulus despite better-than-expected jobs data

US GDP grew at an annualised rate of 2.5% in Q1, up from 0.4% in Q4, but after allowing for inventories the pace slowedUS GDP grew at an annualised rate of 2.5% in Q1, up from 0.4% in Q4, but after allowing for inventories the pace slowed

. . . ,. . . , --

ISM data) hitting a tenISM data) hitting a ten--month low in April. Employment growth was meanwhile strongermonth low in April. Employment growth was meanwhile stronger--thanthan--expected, driving the joblessexpected, driving the jobless

rate down to its lowest since 2008. However, the rate of job creation is unlikely to encourage the Fed to start withdrawingrate down to its lowest since 2008. However, the rate of job creation is unlikely to encourage the Fed to start withdrawing

, ., .

USUS PMI and economic growthPMI and economic growth US nonUS non--farm payrolls and unemploymentfarm payrolls and unemployment

62

67

0.5

1.0

1.5

,

10

11

200

400

600

47

52-0.5

0.0

7

8

-200

0

37

42

-2.0

-1.5

- .

GDP

PMI

5

6

-800

-600

-

Monthly payrolls change

Unemployment

\ 6

32

2006 2007 2008 2009 2010 2011 2012 2013

-2.5 4

2008 2009 2010 2011 2012 2013

-1000


7/12

J apans policymakers rewarded with growth upturn and rising price pressures

J apans PMIs showed growth easing from Marchs jointJ apans PMIs showed growth easing from Marchs joint--record high, but the pace of expansion remained consistent withrecord high, but the pace of expansion remained consistent with

..

and export gains from the weaker yen have helped revive growth. There were also promising signs in the fight againstand export gains from the weaker yen have helped revive growth. There were also promising signs in the fight against

deflation. Manufacturers input costs rose at the fastest rate for over a yeardeflation. Manufacturers input costs rose at the fastest rate for over a year--andand--aa--half, and service sector costs showedhalf, and service sector costs showed

..

J apanJ apan PMI and economic growthPMI and economic growth J apanese input pricesJ apanese input prices

52

57

1.0

2.0

3.0,

70

75

80

Manufacturing

Services

42

47

-2.0

-1.0

0.0

55

60

65

32

37

-5.0

-4.0

-3.0

GDP

PMI40

45

50

\ 7

27

2006 2007 2008 2009 2010 2011 2012 2013

-6.0 35

2008 2009 2010 2011 2012 2013


8/12

Euro area recession continues, with renewed downturn in Germany

The Eurozone PMI rose slightly in April, but the surveys continued to indicate a strong pace of economic contraction.The Eurozone PMI rose slightly in April, but the surveys continued to indicate a strong pace of economic contraction.

, ,, ,

downturn in Germany, where output fell for the first time since last November. The ECB reacted to the ongoing recessiondownturn in Germany, where output fell for the first time since last November. The ECB reacted to the ongoing recession

by trimming its main policy rate to an allby trimming its main policy rate to an all--time low of 0.5%, though few expect the cut to have a material impact.time low of 0.5%, though few expect the cut to have a material impact.

EurozoneEurozone PMI and economic growthPMI and economic growth Output by countryOutput by country

60

65

1.0

2.0

,

60

65

45

50

55

-

0.0

45

50

55

35

40

-2.0

.

GDP

PMI

35

40Germany

France

Italy

S ain

\ 8

30

2006 2007 2008 2009 2010 2011 2012 2013

-3.0 30

2009 2010 2011 2012 2013


9/12

UK economy starts Q2 on good footing, after better-than-expected growth in Q1

The April PMIs signalled the fastest rate of expansion in the UK since the OlympicsThe April PMIs signalled the fastest rate of expansion in the UK since the Olympics--related growth spurt seen last August.related growth spurt seen last August.

,,

further in services. The improved survey data point to a good start to Q2 and, coming on the back of a betterfurther in services. The improved survey data point to a good start to Q2 and, coming on the back of a better--thanthan--

expected 0.3% increase in GDP in Q1 and above target inflation, meant the Bank of England saw no need for moreexpected 0.3% increase in GDP in Q1 and above target inflation, meant the Bank of England saw no need for more

..

UKUK PMI and economic growthPMI and economic growth UK manufacturing exportsUK manufacturing exportsCom osite PMI GDP % UK PMI Manufacturin Ex orts Index 3m/3m % ch ex orts ONS

57

62

0.5

1.0

1.5

60

65

8

12

47

52

-0.5

0.050

55

0

4

37

42

-2.0

-1.5

- .

GDP

PMI40

45

-8

-4

UK goods exports

PMI New Export Orders

\ 9

32

2006 2007 2008 2009 2010 2011 2012 2013

-2.5 35

2007 2008 2009 2010 2011 2012 2013

-12


10/12

Equities surge to new highs on central bank largesse

Global equities hit a postGlobal equities hit a post--crisis high again in early May, with the S&P 500 reaching an allcrisis high again in early May, with the S&P 500 reaching an all--time record. Earnings have nottime record. Earnings have not

, . ,, . ,

index some 25% above its average over the past 12 months, equity price momentum and the PMI are moving in oppositeindex some 25% above its average over the past 12 months, equity price momentum and the PMI are moving in opposite

directions suggesting either improved equity sentiment will soon feed through to the real economy, or that stimulus is notdirections suggesting either improved equity sentiment will soon feed through to the real economy, or that stimulus is not

..

WorldwideWorldwide equity pricesequity prices % change since:pre-crisis

peak

end of

2012

last

monthFTSE All World Index diver ence from 12 month ave. Global PMI

FTSE All World -11.2 10.7 5.5

Dow Jones Industrial Ave. 6.6 15.3 3.4

S&P 500 4.3 14.5 4.520

40

60

60

65

FTSE 100 -2.2 11.6 4.9

Eurofirst 80 -37.2 5.9 6.9

-

-20

0

50

55

. . .

CAC 40 -35.9 8.7 7.9

Shanghai Composite -63.1 -1.0 1.6-80

-60

-

40

45

Global share price momentum

\ 10

Nikkei 225 -21.8 37.4 8.3-100

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

35


11/12

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12/12

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Economic Overview - May 2013