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Citi

Global Economic Growth Showing Signs of Moderation

Among 38 manufacturing PMIs, 24 were still in expansion, while the average has fallen from 52.3 to 51.7, which is still consistent with moderate global economic growth that Citi analysts expect for 2019, even though equity markets have already discounted worse.

The pace of moderation was led by a large decline in US ISM PMI, falling from a lofty 59.3 in November to a still expansionary 54.1 in December. The drop in new orders was more pronounced from 62.1 to 51.1. These numbers are actually more consistent with the real GDP growth of 3% in 2018.

The data also reflects the temporary nature of tax cut stimulus. ISM PMI only rose to the 58-62 range (Feb-Nov 2018) after tax cuts were passed. Now, those effects are gone and expectations have returned to earth. The ISM data overshadowed the stronger than expected ADP data that showed 271K gains in private employment.

 

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Elsewhere, the slowdown is also evident. Eurozone PMI held steady, with France contracting amid protests, while Germany edged slower slightly and Italy gaining. UK and Japan also managed to gain, while oil producing nations felt the bite from oil prices declines.

In Asia ex-Japan, six of eleven markets remains above 50, while China, Taiwan, Korea, Malaysia and HK are in contraction. The largest declines came from Vietnam, Malaysia and Philippines, while Indonesia and Thailand saw pickups and Korea narrowed its contraction.

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