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World Production Pause
Markit gave us a pretty good picture of the global manufacturing economy this morning with its PMI results for France, Germany, China, and for the first time the USA. I think you could say that the global trend right now is deceleration, as each of the countries slowed from April to May. Germany in particular put up a valiant fight over the last couple of years as a leading exporter in Europe, separating itself somewhat from the carnage in the rest of the euro zone. However, over the past few months it's become obvious that Germany can no longer hold itself above water; the latest drop in its PMI down to 45.0 puts it firmly on the contraction zone (a reading of 50 separates growth from deterioration). Yet, France's drop in May was larger than Germany's. Altogether then it's no surprise that the whole Eurozone reading was negative at 45.0.
Obviously Europe is having its troubles, and looking at the results from China and the USA it seems that this has become a global issue. China's manufacturing sector has now, according to Markit, been contracting for seven months straight as exports to Europe slow. After ticking up near breakeven in April to 49.3, it relapsed back down to 48.7 this month.
And then there's the USA, which has being doing well to stay in its own growth bubble. We've really been displaying our relative strength on the global stage over the past several months, and it's no coincidence that the dollar and treasuries are in high demand. Yet, while Markit's manufacturing index for the USA did stay positive it also decelerated, down to 53.9 from 56.0. If Europe and China were to continue to contract for a couple of months more you would really have to question if we could continue to stay in the growth zone.
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