10/4/17: BRIC Composite PMIs 1Q 17: Not Keeping Up With Global Growth

In two previous posts, I have covered the 1Q 2017 data for Manufacturing PMIs and Services PMIs for BRIC economies. Both indicators provided little hope that world's largest emerging economies are generating a positive growth momentum consistent with stronger global economic growth.

The same is confirmed by the Composite PMIs:

Brazil's 1Q 2017 Composite PMI came in at 46.7, up on 46.1 in 4Q 2016, but still below the stagnation line. In simple terms, Brazil's Composite PMIs have now signalled negative growth for 12 consecutive quarters. Improved 1Q 2017 reading is consistent with continued and strong contraction in the economy, albeit a contraction that is less pronounced than in previous quarters.

Russia's Composite PMI posted a reading of 56.7, marking the strongest growth performance for the economy since 4Q 2006. Predictably, given both Manufacturing and Services PMIs as discussed in above-linked posts, Russian economy has outperformed in 1Q 2017 global economic growth momentum and is currently the strongest BRIC economy for the fourth consecutive quarter.

India's Composite PMI came in at 50.8, up marginally on 50.7 in 4Q 2016. This marks the second consecutive quarter of Composite PMI readings for India that are statistically indistinguishable from the stagnation line of 50.0. There is little good news in the data from India, where the fallout from the disastrous de-monetisation campaign by the government has been taking its toll.

Chinese Composite PMI stood at 52.3 in 1Q 2017, down from 53.1, but still the second highest since 1Q 2013. In simple terms, this means that the Chinese economic growth is not accelerating off 4Q 2016 dynamics, suggesting that the economy has now exhausted any momentum gained on foot of a massive credit bubble expansion in modern history.

Chart below illustrates the dynamics:

As shown above, Russia is the only BRIC economy currently generating upward supports for global growth.

When we consider individual sectoral indices, as shown in the chart below, BRIC Manufacturing sector is now pushing global growth momentum down, while BRIC Services sector is co-moving with the global growth, but provides no positive momentum to global economic expansion:

Finally, using monthly data (100=zero growth) for the BRIC economies index of economic activity (computed by me based on Markit and IMF data), the chart below shows just to what extent does Russian growth momentum dominates rest of the BRIC economies dynamics:

In summary, BRIC economies remain negative contributors to the global economic growth, with BRIC economies posting overall positive, but weak growth across the two key sectors.

10/4/17: BRIC Services PMI 1Q 2017: Another Weak Quarter

Yesterday, in my analysis of BRIC Manufacturing PMIs for 1Q 2017, I showed that 51.1 for 1Q 2017, BRIC Manufacturing PMI average came down marginally on 51.2 in 4Q 2016, although up on 49.2 reading for 1Q 2016. Russia was the only economy posting Q1 2017 Manufacturing activity in line with Global Manufacturing dynamics and BRIC as a group were exerting downward pressure on global manufacturing sector.

The news, therefore, were not great for the global manufacturing economy (stalled growth momentum in 1Q 2017), and for the BRIC economies.

Looking at Services PMIs next:

Brazil's Services PMI for 1Q 2017 averaged at 46.4, which is somewhat better than 44.5 average for 3Q 2016 and 4Q 2016 and stronger than 40.0 average for 1Q 2016. In simple terms, Brazil's Services activity continued to shrink and shrink rapidly in 1Q 2017, although the rate of contraction moderated. All in, Brazil's Services PMIs have now been in sub-50 territory for 10 consecutive quarters, two quarters shorter than Brazil's Manufacturing sector. The long-running and deep recession in Latin America's largest economy is continuing, although there are some very fragile signs that it might come to an end in the foreseeable future, as both Manufacturing PMI (at 49.6 in March) and Services PMI (at 47.7 in March) are showing signs of recovery.

Russia Services PMI for 1Q 2017 came in at a blistering pace of 56.8, up on already significant growth in 4Q 2016 at 54.6 and significantly above 1Q 2016 reading of 50.0. All in, this is the fourth consecutive quarter of Services PMIs above 50.0, with all four quarters reading statistically significant for positive growth. Russia is leading BRIC contribution to global growth in both Manufacturing and Services sectors, judging by PMIs.

Indian Services PMI was at 50.2 in 1Q 2017, which not statistically distinct from zero growth marker of 50.0, but up on 49.3 in 4Q 2016. In 1Q 2016 the Services PMI averaged 53.6 which was positive for growth. Indian economy has been hitting some trouble waters for the last two quarters, something I remarked upon in the post covering Manufacturing PMIs linked above. While Services are showing signs of stabilisation, the recovery is not yet evident in the data and is lagging Manufacturing sector performance.

China's Services PMI reading in 1Q 2017 disappointed those who hoped that 2016 credit explosion would set stage for a robust economic growth recovery. With Manufacturing PMI growth signal stuck at the same level in 1Q 2017 as in 4Q 2016, Services PMI reading for 1Q 2017 was actually below the 4Q 2016 reading (52.6 vs 53.0). Given that the index never once slipped below 50 in the history of the series, as well as given the moments of the underlying distribution, 52.6 reading is statistically indistinguishable from zero growth conditions. Thus, although posting the second strongest, amongst the BRIC economies, PMI reading for 1Q 2017 after Russia, Chinese Services sector was a relative negative for global growth momentum.

Chart and table below summarise some of the dynamics discussed earlier:

In summary, as shown above, global PMIs are supported to the upside only by Russian Services PMI dynamics, with Chinese Services PMIs providing virtually no momentum to global Growth, and both India and Brazil contributing negatively. Overall, thus, BRIC economies remain weak and under-perform global growth.

8/2/17: BRIC Composite PMIs: Russia Sustains Growth Momentum in January

Having covered January PMIs for BRIC economies for manufacturing sector (http://trueeconomics.blogspot.com/2017/02/2217-bric-manufacturing-pmis-russia.html) and for services sector (http://trueeconomics.blogspot.com/2017/02/2217-bric-manufacturing-pmis-russia.html), let’s update data for Composite PMI indicator.


Overall, only one BRIC economy - Russia - provided solid support to global growth in January, with China providing a slight downward momentum and India and Brazil leading to a significant downside momentum.

Brazil’s Composite PMI continued to signal severe contraction at 44.7 in January, tanking deeper into a recessionary territory compared to December 2016 reading of 45.2. This makes 23rd consecutive month of contraction. Brazil registered recessionary PMIs in both Services and Manufacturing and in both sectors, January readings were no better than December. In simple terms, there is no light in the end of Brazil’s recessionary tunnel, yet.

Russia Composite PMI posted a robust upward improvement, rising from an already fast-paced 56.6 in December 2016 to 58.3 in January 2017, marking 12th consecutive month of above 50 readings and the highest Composite PMI level on record. Impressively, both Services and Manufacturing sectors PMIs rose in January, compared to December.

Chinese Composite PMI posted a significant slowdown in growth from 53.5 in December 2016 to 52.2 in January. Still, the index remains above 50 mark for 11th month in a row. Chinese Manufacturing PMI declined substantially in January, while Services posted a very modest drop. Importantly, Chinese Manufacturing PMI has now dropped below statistically significant above-50 reading, after just one month at the level close enough to being almost statistically significant.

Third month of sub-50 readings in Services PMI and anaemic 50.4 reading in manufacturing meant that India’s Composite PMI remained below 50.0 marker for the third consecutive month, posting 49.4 in January compared to 47.6 in December. Despite index improvement (signalling slower rate of economic activity contraction), Indian economy remains in recessionary dynamics, courtesy of the completely botched self-inflicted policy mayhem - the misguided demonetisation.

Table below summarises the most recent movements in Composite PMIs

Chart below shows Composite PMIs for BRICs (quarterly basis) against the Global Composite PMI, showing that the current global growth trend is still being supported by the BRICs, with primary positive impact coming from Russian figures.

The following chart summaries the sheer magnitude of Russian growth momentum compared to BRICs-ex-Russia:

However, the good news is that despite slippage in India and extreme weakness in Brazil, overall BRIC’s contribution to global growth continues to trend upward, albeit with some significant moderation since mid-4Q 2016:

7/2/17: BRIC Services PMIs: Supporting Global Growth

BRIC Services PMIs for January signal continued expansion on world’s largest emerging economies.

Brazil Services PMI remained at a disappointing 45.1 in January, same as in December 2016, implying relatively steep rate of economic contraction in the sector. This marks 23rd consecutive month of sub-50 readings for the indicator, almost on par with 24 months-long sub-50 readings run for Manufacturing. Current 3mo moving average for Services PMI is at 44.9, marginally up on 44.0 3mo average for the previous period and on 44.5 3mo average through January 2016. Current 3mo average for Services is in line with the 45.1 3mo average for Manufacturing. Both sectors are signalling continued steep decline in the economy battered by 2 years of recessionary dynamics and no signs of a light at the end of that tunnel.

In contrast to Brazil, Russia Services PMI posted another steep acceleration in growth, rising from 56.5 in December 2016 to 58.4 in January 2017, the highest reading in 102 months. As a reminder, Russia’s Manufacturing PMI reached 70-months high in January at 54.7. Russian services sector now posted 12 consecutive months of above 50 readings, implying that Russian recession is now over (with Manufacturing PMI reading above 50 for 6 months in a row). 3mo moving average through January is at blistering 56.5, up on already solid 3mo previous at 53.1 and significantly up on 48.2 3mo average through January 2016.

Chinese Services PMI posted a slight moderation in growth from 53.4 in December 2016 to 53.1 in January, with current 3mo average at 53.2, up on 52.2 average for the previous 3 months’ period and on 51.3 3mo average through January 2016. Chinese Services PMI has never registered a sub-50 reading in its history.

India Services sector PMI continued to post sub-50 readings for the third month in a row, coming in at 48.7 in January, compared to 46.8 in December. On a 3mo average basis, January reading is at 47.4, which stands in sharp contrast to the sector fortunes in the previous 3 months period (53.7 average) and compared to January 2016 3mo average at 52.7.

Table below summaries both Manufacturing and Services PMIs for the BRICs:

Chart below shows dynamics in monthly Services PMIs

While the second chart shows current 1Q 2017 performance in quarterly data context.

Key point of the above chart is the strong co-movement between Global PMI and the Russian and Chinese PMIs for the sector. As I noted back in September, this is a strongly positive sign of global economy gaining some much needed growth momentum.

Clearly, Russia leads growth momentum within BRICs, with China providing supporting uplift. India and Brazil act as major drags on global growth across the Services sector.

Note: I covered BRIC Manufacturing PMIs in an earlier post here: http://trueeconomics.blogspot.com/2017/02/2217-bric-manufacturing-pmis-russia.html.

5/1/17: BRIC Composite PMIs: 4Q 2016 & FY 2016

I posted my analysis of BRIC quarterly Manufacturing PMIs here: http://trueeconomics.blogspot.com/2017/01/4117-bric-manufacturing-pmi-4q-2016-and.html and BRIC quarterly Services PMIs here: http://trueeconomics.blogspot.com/2017/01/4117-bric-services-pmis-4q-fy-2016.html.


Now, let’s look at Q4 2016 and FY 2016 Composite PMIs for BRIC economies.

For the first time since 1Q 2013, both services and manufacturing sectors of the BRIC economies are now in a stistcically significant expansion, as shown in the Chart below and summarised in the table that follows:

Composite PMIs as follows:

Brazil remains key underperformed, posting a worsening recession reading of 45.1 in 4Q 2016 compared to 3Q 2016. This was still and improvement on 41.6 reading in 4Q 2015. Despite this, across FY 2016, Composite PMI for the Brazilian economy averaged just 43.1, which is worse than 45.2 reading for the FY 2015 and 49.8 reading for the FY 2014. Brazil’s Composite PMI is now in 11 consecutive quarters of sub-50 readings (12 consecutive quarters of zero or negative growth, if we control for statistical significance).

Russia has posted a third consecutive quarter of growth, with accelerating positive dynamics. In 4Q 2016, Russian Composite PMI run at a blistering pace of 55.4, up on 53.2 in 3Q 2016 and 52.0 in 2Q 2016. This is the fastest pace of expansion since 2@ 2008. As the result, FY 2016 Composite PMI for the Russian economy came in at 52.6, signalling relatively robust rate of growth - the fastest pace of growth for FY 2016 for any BRIC economy. In 2015, FY reading was 48.8 (second worst in the BRIC group) and in 2014 it was 48.9 (the worst performance in the BRIC group). Based on three consecutive quarters of above 50 (statistically significant) PMIs, we can now call the end of the Russian recession, although risks of a reversal to the downside still remain, primarily due to lags in recovery in manufacturing sector.

Chinese Composite PMI came in at 53.1 in 4Q 2016, up on 51.7 in 3Q 2016 and marking the highest reading for any quarter since 4Q 2010. The expansion has now been sustained over 4 consecutive quarters, albeit once we adjust for statistical significance, growth in Chinese economy as measured by the Composite PMIs is only two quarters deep. FY 2016 reading is now at 51.4 - third fastest in the BRIC grouping, and an improvement on 2015 FY reading of 50.3. FT 2016 result posted higher rate of growth than in 2013-2015.

Indian Composite PMI came in at 50.7 - a sharp slowdown from 53.1 in 3Q 2016. The PMI reading is now statistically indistinguishable from 50.0 - the first time this happened since 2Q 2015. FY 2016 average Composite PMI for the Indian economy came in at 52.1, the second fastest pace of growth in the BRIC economies group and an improvement on 51.7 in 2015. The pace of growth signalled by the Composite PMIs in 2016 was the fastest over the last 4 years.

Chart below illustrates trends in quarterly Composite PMIs

Key take aways:

1) Russian Composite PMI is now signalling rates of growth consistent with pre-2H 2008 data. If trend to the upside is confirmed, Russian economic recovery will be not only sustained, but robust. Last two quarters of Composite PMI readings suggest growth in the range of 2.5-3 percent per annum, which exceeds even the rosier forecasts for 2017 at 1.7 percent. Interestingly, unlike in the case of China, Russian economic recovery is not based on either monetary or fiscal stimuli. Monetary policy in Russia remains fully focused on containing inflation and current interest rates are approximately 2.5-3.5 points too high to support even modest growth in investment. Meanwhile, fiscal policy remains conservative and the Government has been extremely reluctant to ease fiscal purse strings, absent access to normal funding markets, given the levels of geopolitical uncertainty, and having little support for its budget from primary commodities prices.

2) Chinese Composite PMI is also showing signs of a break-away fro  the recent trends. However, the reading is still only one quarter in the duration and is clearly anchored to aggressive monetary and fiscal easing. As the result, I am reluctant to call this a structural trend change.

3) India’s one quarter fall in Composite PMIs is a signal to watch. Currently, it is too early to call this a shift in a trend and there are non-structural reasons that might be behind this growth slowdown (e.g. de-monetization policey etc), but over 2Q 2014-1Q 2016 and less so during 2Q-3Q 2016, Indian economy was supportive of stronger growth across BRIC group and contributed positively to BRIC share of Global GDP expansion. The 4Q 2016 reading is putting this into question.

4) Brazil remains in deep economic recession. Over the last 5.5 years, Brazil’s Composite PMI has averaged just 48.3, with the last three years average reading of just 46.0.

4/1/17: BRIC Services PMIs: 4Q & FY 2016

I posted my analysis of BRIC quarterly Manufacturing PMIs here: http://trueeconomics.blogspot.com/2017/01/4117-bric-manufacturing-pmi-4q-2016-and.html.

Now, let’s look at Services sector. Table below summaries latest data

Brazil Services PMI for 4Q 2016 came in at 44.5, unchanged on 3Q 2016 and marking rapid rate of contraction in the country’s Services economy. This is 9th consecutive quarter of sub-50 readings, and 12th consecutive quarter of PMI readings statistically at or below 50.0 mark. Services recession continues to be worse than Manufacturing recession for the seventh quarter in a row.

Russian Services PMI ended 2016 with a bang. 4Q 2016 reading averaged 54.6, up on 3Q reading of 53.8. FY 2016 average is solid 52.9, which is a big contrast to 48.5 FY average for 2015. This is the strongest rate of quarterly average growth since 1Q 2013. Overall, dynamics in the Services sector support the view that Russian Services economy has now moved solidly out of the recession and into broad expansion. To translate this into overall economic outlook for growth, however, we need at least one (preferably two) quarters of above 52 readings in Manufacturing.

Chinese Services PMI also gained strength in 4Q 2016, ending the last quarter at an average of 53.0, up on 3Q 2016 reading of 51.9. FY 2016 average reading for the sector is robust 52.2 which is marginally better than 52.0 average for the the FY 2015.

India Services posted a surprising rapid contraction, falling for 4Q 2016 to 49.3 from 52.9 average for 3Q 2016. This marks the first sub-50 reading since 2Q 2015 and is hard to interpret as anything but a volatility induced by monetary reforms and a couple of other policy blunders. Still, 2016 FY average for the sector is at 51.8 which is virtually unchanged compared to 51.7 average for FY 2015.

Looking at the trends:

1) Russian rate of Services sector growth is now on par with pre-crisis period (2013 and earlier). China is taking second place in terms of Services growth momentum, albeit its expansion is both weaker than Russian, and sustained by superficial means (monetary and fiscal stimuli - not present in Russia).

2) India is on a sharp volatility down, which needs to be confirmed if we are to talk about general weaknesses in the economy.

3) Brazil remains the sickest of all BRICS, confirming the same positioning in country Manufacturing.

4) Again, tracing out longer term trends, Russian general slowdown set on around 2Q 2013 in Services has now been broken to the upside. While Chinese Services continue to trend along shallow growth line, and India’s trend (highly volatile) is suggesting some weaknesses in growth. Brazil’s Services weaknesses (turned decline in 4Q 2014) that started around 4Q 2012 - 1Q 2013 is still pronounced.

11/9/16: BRIC PMIs: Composite Activity - August

In the previous post I promised to update Composite PMI indicators for BRIC economies, so here it comes.

The good news is that Russia and India are posting Composite readings that are statistically significantly above 50.0 for the second month in a row. For Russia, this is the third consecutive month of Composite PMI readings statistically above 50.0 and for India - second.

The bad news is that Brazil acts as big drag on BRIC growth with severely depressed Composite PMI reading for 18th month running. Worse, Brazil's position has deteriorated in August compared to July.

Meanwhile, China posted virtually unchanged Composite PMI in August compared with July, with both readings being very close to signalling statistically significant expansion. Last time China posted statistically significant reading above 50 line was in August 2014.

Couple of charts to illustrate the trends:

As the chart above indicates, Russia remains a driver to the upside in terms of BRIC economies PMIs, with Brazil acting as a major drag and China as a driver toward lower growth.

Good news: across overall BRIC grouping, growth remains positive (albeit very shallow) and is ticking up (albeit with increased volatility). Bad news: since 1Q 2013, BRIC economies as a group are showing extremely low growth performance compared to their historical trends (red box in the chart below).

3/3/16: BRIC Composite Activity - February

On a cumulative basis (based on Composite PMIs for each country), the BRIC economies as a group have posted a very disappointing performance in February 2016.

Note: for this index, 100.0 is a zero growth marker.

Russian economy Composite Indicator posted a positive upside surprise, rising from a contractionary reading of 96.8 in January to a weakly-expansionary reading of 101.2. 3mo average through February 2016, however, remains below 100 line at 97.9, which is weaker than the 3mo average through November 2015 at 100.3. The details of Russian Manufacturing sector woes are covered here: http://trueeconomics.blogspot.com/2016/03/2316-bric-manufacturing-pmi-february.html, while details of Russian Services and Composite PMIs upside are covered here: http://trueeconomics.blogspot.com/2016/03/3316-russia-services-composite-pmi.html.

As a result, Russian economy acted as a factor pushing up BRIC rates of growth in February:

In contrast with Russia, Chinese Composite Indicator posted a significant contraction in February, falling from 100.2 (zero growth) in January 2016 to 98.8 (weak contraction) in February. On a 3mo average basis, the index is now at 99.3 for the period through February 2016, up marginally on 98.9 reading for the 3months through November 2015, but down on 102.4 reading for the 3mo average through February 2015. Details of Chinese Manufacturing PMIs are covered here: http://trueeconomics.blogspot.com/2016/03/2316-bric-manufacturing-pmi-february.html, while details of Services and Composite PMIs are covered here: http://trueeconomics.blogspot.com/2016/03/3316-china-services-composite-pmi.html.


India’s Composite Indicator fell from 106.6 in January to 102.4 in February, signalling major slowdown in the rate of economic expansion. 3mo average through February 2016 is at 104.1, reflecting robust growth in January, and up on 102.9 3mo average through November 2015, but below 105.3 reading for the 3 months period through February 2015. The weakness in the Indian economic growth is highlighted by comparison to the historical average, which stands at 109.5.

Per Markit: “February data showed that services firms and goods producers alike registered weaker increases in activity. …Falling to a three-month low of 51.4 in February, from 54.3 in January, the seasonally adjusted Nikkei Services Business Activity Index highlighted a softer expansion of output that was only marginal. Where growth was seen, businesses reported higher levels of incoming new work. Although new orders at services firms continued to rise in February, the rate of expansion eased to the weakest since last November as firms reportedly faced strong competition for new work during the month. A quicker increase in order book volumes in the manufacturing economy was insufficient to prevent growth of private sector new orders from easing to a three-month low.”

Conditions in Indian Manufacturing are covered in detail here: http://trueeconomics.blogspot.com/2016/03/2316-bric-manufacturing-pmi-february.html.


Meanwhile, Brazil remained the sickest economy in the BRIC group. Composite Indicator for Brazilian economy sunk to an all-time low of 78.0 from an already recessionary 90.2 in January. As the result, 3mo average for Brazil’s Composite Indicator was at 85.3, down on already extremely weak 86.6 recorded over the 3 months through November 2015 and on 100.1 3mo average through February 2015.

According to Markit: “The downturn in the Brazilian economy took a noticeable turn for the worse in February. Business activity, new orders and employment all fell at, or near to, the fastest rates since the combined manufacturing and service survey began in March 2007. Companies continued to link the adverse operating environment to the ongoing economic, financial and political crises. …Accelerated downturns were registered at manufacturers and service providers alike, although the slump at services companies was especially severe. At 36.9 in February, down from 44.4 in January, the seasonally adjusted Markit Services Business Activity Index posted its lowest reading in the nine-year survey history. Business activity has fallen in each of the past 12 months.”

Brazil’s Manufacturing PMIs were covered in detail here: http://trueeconomics.blogspot.com/2016/03/2316-bric-manufacturing-pmi-february.html.

The summary of changes in both manufacturing and Services sectors across all BRIC economies is here:

Thus, overall, global GDP-weighted BRIC PMI Indicator (computed by me) fell to 98.4 - signalling moderate or mild contraction, down from January reading of 100.6. The Index is now registering sub-100 readings in seven out of nine last months. Worse, BRIC economies last posted a statistically significant reading for growth back in December 2014. On a 3mo basis, 3 months average through February 2016 is at 99.1, which is basically unchanged on 3mo average through November 2015 (99.0) and significantly lower than the 3mo average through January 2015 (101.8). Starting with February 2015, the index has been averaging zero growth.

3/3/16: China Services & Composite PMI: February

China Services PMI fell to 51.2 in February, from January’s six-month high of 52.4, pointing to a much slower rate of growth than the historical series average of 55.0. This comes on foot of Manufacturing PMI registering an outright contraction in February, with the rate of reduction quickening to the steepest since September 2015 (details here: http://trueeconomics.blogspot.com/2016/03/2316-bric-manufacturing-pmi-february.html).

Services PMI 3mo average through February was 51.3, which is basically flat on 51.2 recored in 3mo period through November 2015 and lower than 3mo average through February 2015 (52.4).

Per Markit: “New business growth also slowed across the service sector in February after a solid rise at the start of the year. Furthermore, the latest increase in new orders was weaker than the long-run trend and only modest, with some panellists commenting on relatively subdued client demand. New orders continued to decline at manufacturing companies, and at a slightly quicker rate than at the start of 2016.”

After posting a weak stabilisation in January (at 50.1), the Composite PMI fell to a recessionary level of 49.4 in February, indicating “a renewed fall in total Chinese business activity in February… to signal a marginal rate of contraction.”
 On a 3mo basis, 3mo average through February 2016 was at 49.7, up on 3mo average through November 2015 (49.5) and down on 3mo average through February 2015 (51.2). Again, last six months we saw averages well below historical average (52.9).

Per Markit, “slower increases in both activity and new orders contributed to a weaker expansion of service sector staff numbers in February. Companies that reported higher staff numbers generally mentioned hiring new employees in line with new order growth. Job shedding meanwhile intensified across the manufacturing sector in February, with the latest decline in workforce numbers the sharpest since January 2009. As a result, composite employment fell at a rate that, though modest, was the quickest in six months.”

This clearly signals that troubles are not over for Chinese economy and also suggests that currently projected rates of growth for the world’s second largest economy are way off the mark. Composite PMIs have now posted sub-zero growth signals in five out of the last seven months, with one other month reading being basically consistent with zero growth. On a Composite indicator basis, China is now the second weakest economy in the BRIC group after Brazil, with Russia overtaking itm having posted a composite index reading of 50.6 in February. Over the last 12 months, the same situation prevailed in July-September 2015, and in November 2015 the two countries were tied for the second worst performance reading.

3/3/16: Russia Services & Composite PMI: February

Russian Services PMI came in with surprising upside that bucked the trend in Manufacturing (see links here: http://trueeconomics.blogspot.com/2016/03/2316-bric-manufacturing-pmi-february.html), posting 50.9 reading in February, up from 47.1 in January. On a 3mo basis, however, 3mo average through February remains below 50.0 expansion line at 48.6, which is actually poorer than 49.6 3mo average through November 2015, although much better than 43.7 3mo average through February 2015. In simple terms, February uptick in growth in Services is fragile, unconfirmed, and at this stage does not constitute a robust signal of economic stabilisation.

Per Markit: “Russian service providers reported a slight increase in their business activity levels during February, driven by an expansion in new orders. However, a rise in new projects could not prevent a further sharp deterioration in outstanding business in the sector. Meanwhile, job cuts were evident while price pressures continued to persist.” Still, “the latest increase ends a four month sequence of contraction. Panel members partly linked rising output to an increase in new export orders, the result of a depreciating rouble.”

Net summary is: February reading for Services is encouraging, but is not yet consistent with sustained stabilisation in the economy. 

This has been confirmed by the Russia’s Composite Output Index which also returned to expansion territory in February for the first time in three months. Per Markit: “however at 50.6, up from January’s 48.4, the latest upturn was relatively weak.” On a 3mo basis, the Composite index is still below 50 at 49.0, which is lower than Composite Index average for the 3 months through November 2015 (50.2) although strongly ahead of the abysmal reading for the 3mo period through February 2015 (46.2).

“A higher level of new business was reported by Russian service providers during February, the first increase in five months. However, the pace of
growth was relatively weak. Anecdotal evidence suggested that the expansion reflected the introduction of new products across the sector. Meanwhile, a slight rise in volumes of new orders were reported by manufacturers this month.”

Again, on the net, Composite PMI figures show the return to growth to be unconvincing at this stage. We will need at least 3 consecutive months of above 50 readings to make any serious judgement as to the reversal of recessionary dynamics in Russian economy.

2/3/16: BRIC Manufacturing PMI: February

BRIC manufacturing sector conditions have posted major deterioration in February 2016 compared to January, marking another ugly month for world’s largest emerging economies.

Russian Manufacturing PMI for February posted a rather unsurprising and relatively mild deterioration from already marginally-recessionary reading in January. Details are covered here: http://trueeconomics.blogspot.com/2016/03/2316-russia-manufacturing-pmi-february.html.

Chinese Manufacturing PMI continued to tank in February, with country Manufacturing sector remaining the weakest of all BRICs, save Brazil, every month since July 2015. The details are covered here: http://trueeconomics.blogspot.com/2016/03/2316-china-manufacturing-pmi-february.html.


Meanwhile, Brazil’s manufacturing recession “extended to February, with a further drop in incoming new work leading companies to lower production and cut jobs again. Such was the extent of the downturn that firms shed jobs at the second-fastest pace since April 2009,” per Markit.

Brazil’s Manufacturing PMI fell from an ugly 47.4 in January to a horrific 44.5 in February, marking 13th consecutive sub-50 reading. On a 3mo average basis, Brazil’s Manufacturing remained in a contraction (45.8) over the 3mo period through February 2016, just as it was in the contraction (44.0 average) in the 3mo period through November 2015. In 3mo period through February 2015, PMI averaged 50.2.

Per Markit: “Amid evidence of an increasingly fragile economy and a subsequent fall in demand, the level of new business received by Brazilian manufacturers decreased in February. Having accelerated to the fastest since November 2015, the pace of contraction was steep. As a consequence, companies scaled down output again. Production dipped at a sharp and accelerated rate.
Supported by the depreciating real, new foreign orders for Brazilian manufactured goods improved for the third straight month in February. That said, new business from abroad increased at a modest pace overall.”

All in, Brazil remains BRIC’s weakest economy in Manufacturing sector terms every month since February 2015.


As in previous months, India was the only BRIC economy with Manufacturing PMI reading above 50.0 marker. In February 2016, Indian Manufacturing PMI stood at 51.1, unchanged in January 2016. The positive impact of this, however, is weak, at 51.1 marks relatively low (by historical comparisons) growth in the Indian Manufacturing sector.

Per Markit: “Manufacturing business conditions in India continued to improve, with new orders, exports, output and purchasing activity all rising in February. However, a faster expansion in new business inflows failed to lift growth of output and workforce numbers were left broadly unchanged again. PMI
data also highlighted a weaker rise in costs and the first reduction in selling prices since September 2015… Reflecting sustained growth of new work, Indian manufacturers raised their production volumes in February. That said, the rate of expansion eased since January and was marginal overall.”

On a 3mo MA basis, Indian Manufacturing PMI averaged 50.4 in 3 months through February 2016, down on 50.7 average for the 3mo period through November 2015 and down massively on 52.9 3mo average through February 2015.

Overall, India remains the best performing economy in the BRIC group, even though its Manufacturing sector growth is now in slow growth mode since September 2015.

In summary, in February, BRIC group of world’s largest emerging markets economies has posted another deeply disappointing performance across the Manufacturing sector. This compounds adverse headwinds in these economies in January and signals strong possibility of the BRICs exerting a significant negative pressure on global growth.

2/3/16: China Manufacturing PMI: February

Chinese Manufacturing PMI for February signalled worsening operating conditions in the sector and marked 12th consecutive month of recessionary readings, reaching 48.0 in February, down from 48.4 in January and down from 50.7 in February 2015.

Per Markit: “Operating conditions faced by Chinese goods producers continued to deteriorate in February. Output and total new orders both declined at slightly faster rates than at the start of 2016, which in turn contributed to the quickest reduction in staffing levels since January 2009. Lower production was a key factor leading to the steepest fall in stocks of finished goods in nearly four-and-a-half years during February. At the same time, lower intakes of new work enabled firms to marginally reduce their level of work-in-hand for the first time in ten months. Prices data indicated weaker deflationary pressures, with both selling prices and input costs
declining at modest rates.”

On a 3mo MA basis, 3mo average through February stood at 48.2 - second lowest in the BRICs, up marginally on 48.0 3mo average through November 2015, but down on 50.0 3mo average through February 2015.

It is simply impossible to imagine how this data can be consistent with 6.9 percent growth recorded in 2015 or with over 6% growth being penciled for 1Q 2016.

As shown above, China is now a consistent under-performer in the BRIC group since July 2015 with its Manufacturing PMI reading below that of Russia (in a recession) and above Brazil (in a deep recession).

2/3/16: Russia Manufacturing PMI: February

Russian Manufacturing PMI for February produced another disappointment, falling from a marginally contractionary reading of 49.8 to somewhat faster contraction-signalling 49.3.

Per Markit, “Russian manufacturers reported a further deterioration in operating conditions during February, the third in as many months. Job cuts
were evident amid a sharp fall in backlogs of work. However, production remained broadly unchanged as a slight rise in new orders was reported. Meanwhile, price pressures remained evident, as both output charges and input costs rose.” So firms effectively were reducing their backlogs of orders, with work-in-hand reductions continuing now every month since March 2013.

On a slightly positive note, per Markit: “Russian goods producers recorded a slight expansion in new business volumes during February. According to anecdotal evidence, a higher volume of new work reflected the development of new products. However, the rise in new orders was driven by the domestic market, as new export orders declined further. The rate of contraction accelerated to the sharpest in 19 months and was marked overall.”

On a 3mo MA basis, 3mo average through February 2016 stood at 49.3, which is lower than the 3mo average through November 2015 (49.8), but still better than the 3mo average through February 2015 (48.7).

So the key reading from this data is that Manufacturing remains in a shallow downturn for the third month in a row, signalling a poor start to 2016 and leaving no doubt that the economy is now set to post another quarter of negative growth, unless there is a major improvement in Services sector readings in February and a major gain across both sectors in March.

4/2/16: BRIC Composite PMIs: January

In two recent posts, I covered

• Services PMIs for BRIC economies http://trueeconomics.blogspot.com/2016/02/3216-bric-services-pmis-for-january.html and
• Manufacturing PMIs for BRCI economies http://trueeconomics.blogspot.com/2016/02/1216-bric-manufacturing-pmi-january.html

Now, let’s take a look at the Composite PMIs.

As noted in a more in-depth analysis, here: http://trueeconomics.blogspot.com/2016/02/3216-russian-services-composite-pmi.html, Russia’s Composite Output Index remained in contraction territory in January, posting a reading of 48.4, up on 47.8 in December 2015. The Composite index was helped to the upside by the Manufacturing PMI which was also in a contractionary territory at 49.8, but above the very poor performance levels of the Services PMI. January marked second consecutive month that both Manufacturing and Services PMIs for Russia were below 50.0. Last time that this happened was in December 2014-January 2015 and in February-March 2015 - in other words, at the dire depth of the current crisis. Overall, Russia is once again (second month in a row) ranks as the second lowest BRIC performer in terms of Composite PMI reading, ahead of only a complete basket case of Brazil.

As also noted in an in-depth analysis here: http://trueeconomics.blogspot.com/2016/02/2216-china-services-composite-pmis-for.html due to a substantial improvement in the Services PMI, China’s Composite PMI signalled stabilisation in overall economy-wide business activity in January, with Composite Output Index registering fractionally above the no-change 50.0 value at 50.1, up from 49.4 in December. However, overall, Composite PMI of China has been above 50.0 in only two of the last 6 months and on both occasions, index readings were not statistically distinguishable from 50.0. 3mo average through January for Composite PMI stood at 50.0 (zero growth) against 48.9 average through October 2015 and 51.3 average through January 2015. In other words, the economy, judging by Composite PMI might be closer to stabilising, but growth is not exactly roaring back.


India’s Composite PMI rose from 51.6 in December to an 11-month high of 53.3 in January. Per Markit, “Lifting the index were a rebound in manufacturing production as well as stronger growth of services output.” 3mo average for Composite reading is now a5 51.7, slightly down from 52.3 3mo average through October 2015 and compared to 52.8 3mo average through January 2015. With manufacturing and services order books now in an expansionary territory, “growth of new business across the private sector as a whole was at a ten-month high… Higher workloads encouraged service providers to hire additional staff in January, following a stagnation in the prior month. …Meanwhile, manufacturing jobs rose at a marginal rate.” While overall Indian economy has clearly returned to robust growth, underlying conditions remain relatively weak by historical standards. 3mo average Composite index at current 51.7 is well below the historical average of 54.8. India remained on track to being the strongest economy in the BRIC group overall for the 7th month in a row.

In the case of Brazil’s Composite PMIs, the index registered continued rate of contraction rate of contraction for 11th month in a row - a record that is worse than that for Russia. Over the last 24 months, Brazil’s Composite PMI has managed to reach above 50.0 on only 5 occasions, against Russia’s Composite PMI’s 7. Over the last 12 months, Brazil’s Composite PMI was above 50.0 only once, with Russian counterpart rising above 50.0 in 4 months. On a 3mo average basis, Brazil’s Composite PMI stood at 44.5 in January 2016, slightly better than 43.4 reading for the 3mo period through October 2015, but below 49.3 reading attained in January 2015. Per Markit: “January saw Brazil’s economic recession weighing on the private sector for another month …the seasonally adjusted Composite Output Index remained in contraction territory, highlighting a further sharp drop in activity. Moreover, the current sequence of continuous downturn has been extended to 11 months, the longest in almost nine years of data collection.” Both Services and Manufacturing sectors order books posted contractions, meaning that “the private sector as a whole posted an eleventh successive monthly decline in new business. Firms reported tough economic conditions and a subsequent fall in demand.” Once again, Brazil retained its dubious title as the worst performing BRIC economy - a title it has been holding for the last 11 months.

Charts and table to illustrate:

As shown in the above charts, Russia is now exerting a downward momentum on overall BRIC growth dynamics for the second month in a row. However, due to improvements in India and China, BRICs as a whole are now adding positive support for global growth. That support is relatively new and still fragile enough not to call a change in trend in the series.

1/2/16: BRIC Manufacturing PMI January: A Test of Stagnation?

I covered China Manufacturing PMI in an earlier separate note here: http://trueeconomics.blogspot.com/2016/02/31116-china-manufacturing-pmi-its-at.html with core conclusion that Chinese Manufacturing PMIs have been now running second worst in the BRIC’s group since July 2015, staying above only Brazil’s - a country that is in an outright recession. PMI index came in tat 48.4 in January, marginally up on 48.2 in December 2015, marking 11th consecutive month of sub-50 readings. 3mo average through January 2016 is now at 48.4 against 3mo average through October 2015 at 47.6. Current 3mo average is down significantly on 49.8 3mo average through January 2015. Last time Chinese Manufacturing posted statistically significant expansion (as measured by PMI reading above 51.46 - the statistically significant growth marker - was back in July 2014.

India Manufacturing PMI posted a rise to 51.1 in January from 49.1 in December, with January reading being highest in 4 months. This sounds like good news, expect it is not. The reason is that at 51.1, the PMI is well below historical average of 54.5. And it is below January 2015 level of 52.9. 3mo average through January 2016 is at zero growth mark 50.0, which compered poorly to 3mo average through October 2015 at 51.4 and worse relative to 53.6 which is 3mo average through January 2015. Market release was quite upbeat on India numbers, however, noting that “the industry recovered following the contraction seen at the end of last year. Alongside a resumption of output at some firms impacted by December’s flooding, manufacturers also benefited from rising inflows of new business from domestic and export clients.” The sectoral breakdown of the index is also concerning. Again per Markit, “The consumer goods subsector remained the principal growth engine at the start of the year, seeing substantial expansions of both output and new orders. In contrast, producers of investment goods saw output and new orders fall, while production volumes stagnated in the intermediate goods category.”

Russian PMIs were covered in a stand alone post here: http://trueeconomics.blogspot.com/2016/02/1216-russian-manufacturing-pmi-january.html with core conclusion that although Russia retained its's position as the second strongest performing economy by Manufacturing PMIs in the BRIC group in January, the latest reading puts Russian Manufacturing in a stagnation zone too close to 50.0 to call it a full-blown contraction. This has meant that over the last 3 months, Russian Manufacturing PMI averaged 49.7, a reading nominally below 50.0, although an improvement on 49.1 average for 3 months through October 2015, and on 49.4 3-mo average through January 2015. In simple terms, Russian Manufacturing continued to contract in 3 months through January 2016, but the rate of contraction was virtually indistinguishable from zero growth.


This leaves us to cover Brazil Manufacturing PMI. Brazil Manufacturing index posted a rise in January, hitting an 11-mo high of 47.4. By all normal metrics, this is a disaster territory reading, consistent with rather sharp deterioration in trading conditions. But for Brazil - this was an improvement, especially as output and news orders both were contracting at slower rates in January. Per Markit: “The downturn in the Brazilian manufacturing sector continued at the start of 2016, with levels of production and new orders contracting for the twelfth successive month. This continued to filter through to decisions relating to staff hiring, stock holdings and purchasing activity, all of which also declined during the latest survey month.”  On the positive (sort of) side, “output declined at weaker rates in each of the three production categories (consumer, intermediate and investment) covered by the survey. Underlying the latest decrease in output was a further reduction in the level of incoming new orders. The latest drop in inflows of new work received was mainly centred on the domestic market, as the volume of new export business expanded for the second straight month in January.” On a 3mo average basis, 3mo average through January 2016 is at 44.5, which is worse that 3mo average through October 2015 (45.6) and 3mo average through Ja
nuary 2015 (49.9). In simple terms, Brazil remains the basket case of BRIC economies, leading the group to the downside on Manufacturing.

Chart and table below summarise the BRIC’s outlook:

So, overall, BRIC Manufacturing side of the economy is still in a woeful shape. India's return to growth is relatively weak, while contractionary conditions prevail in Brazil (strong, albeit moderating on the end of 2015), Russia (very weak contraction, closer to stagnation) and China (where PMI data has been at serious odds with official national accounts data for some time now). The net result for the global growth is not exactly encouraging.

1/2/16: Russian Manufacturing PMI January 2016: Stagnation Looms

Russian Manufacturing PMI rebound in January compared to December slump, rising from 48.7 in December (the lowest reading since August 2015, to 49.8. Still, January reading was nominally below 50.0, signalling second consecutive month of contraction in country manufacturing activity. In statistical significance terms, January reading is basically singling zero growth.

Per Markit, this means that “Russian manufacturing sector edgeed closer to stability during the first month of 2016” with “both output and incoming new orders return to growth territory”. However, overall, “survey data for the first month of 2016 remained disappointing for Russian manufacturers, as the sector stayed in contractionary territory. Although there were marginal increases in volumes of both production and incoming new orders, job shedding was still evident. Meanwhile, average cost burdens increased at a marked pace, while a more moderate rise in output charges was reported”.

On sectoral basis,”production volumes grew at Russian goods producers during January, having contracted in the final month of 2015. Anecdotal evidence suggested the expansion in output was linked to an increase in
incoming new orders. Job cuts were still evident in the manufacturing sector of Russia in January, continuing a trend that began in July 2013. The rate of job shedding accelerated to a four-month high and was solid overall.”

All of the expansion in new orders was contained within domestic economy, “as new export orders contracted. Falling new business from abroad has been reported in every month since September 2013.”

On a 3mo average basis, Manufacturing PMI for 3 months through January 2016 was 49.7 - below 50.0, although an improvement on 49.1 average for 3 months through October 2015, and on 49.4 3-mo average through January 2015. In simple terms, Russian Manufacturing continued to contract in 3 months through January 2016, but the rate of contraction was virtually indistinguishable from zero growth.

As shown above, Russia retained its's position as the second strongest performing economy by Manufacturing PMIs in the BRIC group.

6/1/16: BRIC Composite PMIs: December

In recent posts, I covered Manufacturing sector PMIs for BRIC economies based on monthly data and Services Sector PMIs here.

Now, let’s consider Composite PMIs for BRIC:


Brazil Composite PMI fell from 44.5 on November to 43.9 in December, As the result, the economy posted 10th consecutive month of sub-50 readings, and since April 2014, Brazil’s economy registered above 50 readings in only three months, with none of these three readings being statically significantly different from 50.0. The last time Brazil’s Composite PMI posted reading statistically consistent with positive growth was in February 2013.

In December, both Manufacturing and Services sectors indicated contracting activity, with Markit concluding that “Private sector activity in Brazil continued to plunge in December as a deepening economic retreat contributed to a further contraction in new business. The seasonally adjusted Composite Output Index fell from 44.5 in November to 43.9 at the year end, pointing to a sharp and stronger rate of reduction. Whereas the downturn in manufacturing production eased (though remained severe), services activity declined at a quicker pace.”

Over 4Q 2015, Brazil Composite PMI averaged 43.7 which is about as bad as the average of 43.6 achieved in 3Q 2015 and much worse than already contractionary average of 49.0 posted in 4Q 2014.


Russian Composite PMI was covered in detail here. Overall, Russia’s Composite index slipped into contraction during December, falling to 47.8, from 50.5 in November, with the decline in output reflected across both manufacturing production and services activity. Overall, Russian economy’s composite PMI averaged 49.1 in 4Q 2015 which is much worse than 50.4 average for 3Q 2015. The data strongly suggests that not only did the economy failed to attain stabilisation, but that growth might have turned more negative in 4Q 2015.


Chinese Composite PMI also signalled declining business activity in December, falling to 49.4 from 50.5 in November. Overall, China posted four months of below 50 readings on Composite PMIs out of the last 5 months and the last time Chinese Composite PMI was consistent with statistically significant growth was in August 2014. In 4Q 2015, Chinese Composite PMI averaged 49.9, which is better than 3Q 2015 average of 49.2, but much worse than the 4Q 2014 average of 51.6. Unlike Russia and Brazil, which posted sub-50 readings across both Manufacturing and Services, China posted sub-40 reading in Manufacturing and above 50 reading in Services, That said, the Services reading was 50.2 - statistically consistent with zero growth - and the second weakest on record (the weakest point was 50.0 in July 2014).


India Composite PMI rose unexpectedly from November’s five-month low of 50.2 to a four-months high of 51.6 in December. Thus, per Markit, the index was “indicative of a rebound in growth of private sector activity. Whereas manufacturing production decreased for the first time since October 2013, services activity increased at an accelerated pace.”

Further per Markit: “Leading services activity to increase was a solid rise in incoming new work, one that was faster than that seen in November. Anecdotal evidence highlighted strengthening demand conditions. Conversely, manufacturing order books decreased, with panellists indicating that demand had been suppressed by the Chennai floods. Across the
private sector as a whole, new business inflows expanded at a faster pace that was, however,
modest.”

4Q 2015 Composite PMI for India stood at 51.5, down from 52.1 in 3Q 2015 and down on 52.2 average for 4Q 2014.


Overall Russia was a negative contributor to the BRIC Composite Activity Index dynamic in December, although overall ex-Russia group performance continued to deteriorate in December faster than in November, as indicated in the chart below:

Note: Composite Activity Index is based on my own calculations weighing BRIC economies by their shares of global GDP. The Index is based on a scale of 100=zero growth.

In 4Q 2015, average Composite Activity Index for BRIC ex-Russia was 96.7 which was marginally better than in 3Q 2015 (86.5) but worse than 101.8 average for 4Q 2014.

Overall 4Q 2015 BRIC Composite Activity Index stood at 99.0, down on 99.2 in 3Q 2015 and on 102.1 recorded in 4Q 2014. 

The chart below shows a clear downward trend in BRIC activity setting on from June 2014 and accelerating since May 2015.

6/1/16: BRIC Services PMIs: December

In recent posts, I covered Manufacturing sector PMIs for BRIC economies based on monthly data (http://trueeconomics.blogspot.ie/2016/01/4116-global-manufacturing-weighted-down.html) and Russian Manufacturing PMIs based on quarterly data (http://trueeconomics.blogspot.ie/2016/01/4116-russian-pmi-in-4q-2015-signalling.html).

The net outrun was that global manufacturing has ended 2015 an inch closer to zero growth / stagnation point and certainly nowhere near the levels of growth consistent with amplification in global economic growth rates forward. Most of this trend is down primarily to BRIC economies all of which have seen Manufacturing PMI falling below 50 marker for the first time since March 2009. As noted, this evidence strongly suggests overall continued downward pressures on growth in world’s largest emerging markets.

Now, consider Services PMIs.


Russian Services PMI data was covered in the earlier post here: http://trueeconomics.blogspot.ie/2016/01/4116-russia-services-manufacturing-pmis.html on monthly basis and on quarterly basis here: http://trueeconomics.blogspot.ie/2016/01/4116-russian-pmi-in-4q-2015-signalling.html. The key takeaway from these was that the data strongly suggests that not only did the economy failed to attain stabilisation, but that growth might have turned more negative in 4Q 2015 in both services and manufacturing sectors.


China Services PMI eased to 50.2 in December, down from 51.2 in the previous month, statistically signalling zero growth in the Services sector. This marks the second-lowest index reading since the series began in November 2005 (behind July 2014). 4Q 2015 average reading stands at 51.1, which is weaker than 3Q reading of 51.9 and well below the 4Q 2014 reading of 53.1.

Per Markit release: “Relatively subdued client demand … was highlighted by only a marginal
increase in new work at service providers that was one of the weakest seen in the series history.”


India Services PMI unexpectedly hit a 10-month high at 53.6 in December up on November’s zero growth 50.1. Overall, Services PMI came in with a strong indication of positive expansion in output across the sector. This pushed 4q 2015 average to 52.3, ahead of 3Q 2015 average of 51.3 and above 51.2 average for 4Q 2014.

Per Markit: “Sub-sector data indicated that output rose in four of the six broad areas of the service economy, the exceptions being Hotels & Restaurants and Transport & Storage. The best performing categories in December were ‘Other Services’ and Financial Intermediation. Leading services activity to increase was a solid rise in incoming new work, one that was faster than
that seen in November. Anecdotal evidence highlighted strengthening demand conditions.” This puts Services dynamics at odds with Manufacturing which posted a significant contraction.


Brazil Services PMI tanked from already abysmal (albeit 8-mo high) 44.5 in November to 43.9 in December, with economy beating “deepening economic retreat”.

Per Markit: “Survey participants commented that worsening economic conditions led new business and activity to decrease. All six monitored subsectors posted lower activity in December, a trend that has been observed throughout the past eight months. The quickest rates of decline were seen in ‘Other Services’, Renting & Business Activities and Post & Telecommunication. Leading services activity to decrease was a further drop in incoming new work. Having accelerated since November, the pace of reduction was among the fastest in the survey history. Panellists indicated that a deepening economic downturn restricted clients’ confidence in committing to new projects.”

4Q 2015 average for Brazil Services PMI now stands at 44.0, up on 3Q 2015 reading of 41.9, but overall so poor, one can’t talk about any improvement at these levels of signalled contraction.


Summary of movements in PMIs for BRIC economies is provided in the table below:

Chart illustrates trends in Services:

I will be covering composite PMIs next, but overall Services PMIs conclusion is that a positive improvement in India was offset by deteriorating growth in China and outright fall-offs in activity in Russia and (much worse) in Brazil. Overall, the data from Services compounds the already rotten data from Manufacturing.

4/1/16: Global manufacturing weighted down by BRICs in December

According to Markit, “The global manufacturing sector ended 2015 on a disappointing note, with the rates of expansion in production and new orders both slowing in December. At 50.9, down from 51.2 in November, the J.P.Morgan Global Manufacturing PMI …fell to a three-month low. The average PMI reading over 2015 as a whole was below those registered in both of the prior two years.”

The new sub-sector data “covering consumer, intermediate and investment goods producers…signalled that the slowdown highlighted by the headline Global Manufacturing PMI during
December mainly reflected weaker expansion at investment goods producers and a further contraction in the intermediate goods sector. In contrast, growth accelerated slightly at consumer goods producers.”

Much of the deterioration is, apparently down to emerging markets weaknesses. “The end of 2015 saw the downturn in emerging market manufacturing continue, with PMI indices for China,
India, Brazil, Russia, Indonesia and Malaysia all in sub-50.0 contraction territory. Although the expansion in developed nations continued, growth slowed (on average) to an eight-month low.”

Note: I covered Manufacturing PMIs for BRIC economies in an earlier post here: http://trueeconomics.blogspot.ie/2016/01/4116-bric-manufacturing-pmis-december.html

You can see the ‘weighting’ effect in the chart here based on quarterly data:

And a summary table for Global Manufacturing PMI from Markit here:

Per Markit:

• Growth rates fell to a 38-month low in the US
• Growth eased to three-month low in the UK, 
• Growth held steady in Japan, and 
• Growth “accelerated to a 20-month high in the euro area.” 

Net outrun: global manufacturing has ended 2015 an inch closer to zero growth / stagnation point and certainly nowhere near the levels of growth consistent with amplification in global economic growth rates forward.

4/1/16: BRIC Manufacturing PMIs: December 2015 and 4Q 2015

BRIC Manufacturing PMIs posted another sector-wide weakening in growth conditions in December, ending 2015 on foot of an outright contraction across the sector in all BRIC economies for the first time since late 2013.

Russian manufacturing PMI posted a deterioration in sector performance in December, falling to 48.7 from 50.1 in November. This reverses two consecutive months of above 50 readings in October and November. On a quarterly basis, 4Q 2015 average reading was 49.7, which is better than 48.4 average for 3Q 2015, but still below 50.0 line. Overall December reading was the weakest since August 2015 and signals that the much anticipated stabilisation of the Russian economy did not take place in December. More detailed analysis of Russian PMIs is available here for monthly data and here for quarterly data. Overall, Russia was the third weakest PMI performer in Manufacturing sector terms within the BRIC group.

Brazil’s Manufacturing PMI remained deeply below 50.0 mark in December, although rising to 45.6 from 43.8 in November. December reading stands as the highest in 3 months, but still signals sharp rate of activity contraction. 4Q 2015 average is at 44.5, which is down on 46.7 average for 3Q 2015. Brazil has now posted Manufacturing PMI readings below 50.0 for 11 months in a row, the longest such record in the group of BRIC countries. In addition, Brazil remained the weakest performer in terms of Manufacturing PMIs in the BRIC group.

Per Markit: “Brazilian manufacturing companies reported worsening operating conditions at the end of 2015. December saw output and new orders dip at rates that, although slower, remained sharp…Amid evidence of cashflow problems, stocks of purchases and post-production inventories both decreased at rates that were the quickest in over six years. …severe downturn in the sector that was evident among the three monitored market groups: consumer, intermediate and investment goods. …December data pointed to a further decline in incoming new work, the eleventh in as many months. …Panellists indicated that a deeper economic retreat and falling purchasing power among consumers had led domestic demand to dwindle. Conversely, new orders from abroad rose. The weaker real had reportedly supported firms in securing new business from external clients. That said, the overall pace of expansion was only marginal.”

China Manufacturing PMI fell from 48.6 in November to 48.2 in October, marking 10th consecutive month of sub-50 readings and the weakest reading in 3 months. On a quarterly basis, 4Q 2015 reading was 48.4 which is somewhat better than 47.4 reading for 3Q 2015, although still signifying overall contraction in the sector. By all metrics, Chinese Manufacturing PMI came in second weakest in the BRIC grouping after Brazil.

Per Markit: “Operating conditions faced by Chinese goods producers continued to deteriorate in December. Production declined for the seventh time in the past eight months, driven in part by a further fall in total new work. Data suggested that client demand was weak both at home and abroad, with new export business falling for the first time in three months in December. As a result, manufacturers continued to trim their staff numbers and reduce their purchasing activity in line with lower production requirements. Meanwhile, deflationary pressures persisted, as highlighted by further marked declines in both input costs and selling prices.” Overall, this was the first time exports orders fell since September 2015.

India Manufacturing PMI posted a moderate drop from 50.3 in November to 49.1 in December, putting PMI reading below 50.0 line for the first time since June 2015. However, on a quarterly average basis, 4Q 2015 came in at 50.0, signalling zero growth in the sector over the last quarter of 2015, down from relatively robust growth posted in 3Q 2015 (with PMI averaging 52.1). PMI averaged 51.7 in 2Q 2015. The data confirms my previously expressed view that India is now skirting dangerously close to a manufacturing recession and that overall economic growth conditions in the economy have deteriorated significantly compared to 2014.

Per Markit: “Indian manufacturers saw business conditions deteriorate at the end of 2015. December’s incessant rainfall in Chennai impacted heavily on the sector, with falling new work leading companies to scale back output at the sharpest pace since February 2009. On the price front, inflation rates of both input costs and output charges were at seven month highs. …Consumer goods bucked the sub-sector trend and was the only category to see improving business conditions in December as production and new orders rose. Conversely, incoming new work and output fell in both the intermediate and investment goods market groups. Having risen for 25 straight months, total
manufacturing production in India fell during December. Furthermore, the rate of contraction was the sharpest in almost seven years.”

Summary table:

And a chart to illustrate

Hence, overall, as of December, 

• Brazil manufacturing PMI continued to move along the general downward trend that started around 1Q 2013 and runs unabated since then, with Manufacturing recession setting in firmly from 2Q 2015 on. 
• China, having displaced Russia for the second weakest position in the BRIC economies in terms of Manufacturing PMIs back in July 2015 remains the second weakest link in the BRIC group. Chinese manufacturing has been posting negative trend in PMIs since mid 2014, although in the last 3 months of 2015 this trend somewhat improved. 
• Meanwhile, Russian Manufacturing is once again taking on water, having reverted down from a positive sub-trend that was present over May-November 2015.
• Last, but not least, the bright star of India is now fading in terms of Manufacturing PMIs, with both trend (downward since December 2014 and more pronounced downward trend since July 2015) and absolute level of PMI reading signalling a risk of manufacturing sector recession in India. 

Overall, we now have all BRIC Manufacturing PMIs below 50 line for the first time since March 2009. This strongly shows overall continued downward pressures on growth in world’s largest emerging markets.