Global Economy: Onwards and upwards - ANZ

In view of analysts at ANZ, calls that global growth have peaked in Q2 look premature based on the recent ‘soft’ indicators from Europe and the US.

 Key Quotes

 “The US Composite PMI index for May rose to 53.9 as manufacturing eased slightly to 52.5 and services rose to 54.0. Manufacturing new orders slid to 53.4 and export orders also dipped to 51.3. Alongside the Richmond Fed manufacturing index for May falling to 1, it suggests manufacturing growth momentum has peaked in the US. There were sharp drops in shipments -2 (last: 25) and new orders to 0 (last 26) within the Richmond index too. In contrast, the services incoming new business index jumped 2.4 pts to 54.7 and the services employment index rose 2 pts to 52.8 (50.8). This suggests that the non-manufacturing side of the economy (85% of GDP) is reaccelerating.”

“It was a similar, but slightly different story in Europe, where the strength of the euro-zone composite PMI and German IFO in May provides further evidence of an economic recovery gaining pace in the second quarter. The euro-zone Composite PMI was unchanged at 56.8, its highest level since April 2011. But the difference compared to the US was a rise in the manufacturing output PMI, which was offset by a fall in the services PMI.”

“Both the German and the French headline PMI indices rose, which suggests the strong increase in Italy’s April PMI may have reversed. The strong German performance saw the Finance Minister Schaeuble join Chancellor Merkel in saying the euro exchange rate is too low for Germany overnight.”