Global: Business Cycle Monitor
Key leading indicators to watch:
- OECD leading indicators: 8 June
- German factory orders: 8 June
- German ZEW: 16 June
- German Ifo: 22 June
- Euro Flash PMI: 21-24 June
- US ISM/Global PMI: 1 July
Leading indicators continued to improve in May. The development points to a rather synchronous recovery with improvement in leading indicators in all regions. The picture of improvement is supported by significant rises in metal prices and freight rates recently.
Global PMI rose to 45.3 in May from 41.8 in April and thus continues the increasing trend from the previous months reaching for the crucial level of 50. The most leading sub index new orders rose significantly to 48.6 from 43.8. The balance between inventories and orders continued to improve, which points to a further recovery in global PMIs in the months ahead.
Again Asia has shown strong recovery signs and most PMIs are now above 50. Importantly hard data for exports and production has also risen - perhaps most impressively in Japan where companies plan to increase production further in the coming months.
In the US, ISM manufacturing has continued its march higher, driven by further increases in new orders. Euroland PMI also surprised positively. As domestic demand has stayed very subdued, the improvement is probably related to improvement on export markets.
The slowest recovery in the PMI indices can be found in the CEE countries, which is in line with expectations.
Latin America is also looking stronger, with both PMI and industrial production turning higher in Brazil.
Outlook: We continue to look for further improvements in leading indicators in the coming months. Lean inventories in combination with demand being lifted by substantial stimulus should pave the way for increases in production. We see increasing upside risk to Q3 growth. See also Global Scenarios, June 2009.
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