It’s not often it happens, but the last few days has seen good news on the economy, from China to the euro area, from India to the US. There is only one obvious exception.
Let’s start with a 17-year high. The last time US consumers were as confident as they were in February, was in 2001. The latest US consumer confidence index, from the Conference Board, rose to 130.8 in February. And that was a 17-year high.
The strength in the US jobs market – with US unemployment at just 4.1 per cent, the promise of Trump tax cuts, and the strength of the US stock market, which remains extremely high despite recent falls, seem to lie behind booming consumer confidence. Just recall, however, that the index had been performing strongly during the latter years of the Obama presidency, we are actually seeing the continuation of a trend.
Looking east, news in this morning from China was good, the latest purchasing managers index, or PMI, tracking Chinese manufacturing and produced by Caixin, improved on the month before, despite there being less working days in the month. The news from China is good, fears of a hard landing in the economy that were so common a couple of years ago seem to have receded, although the consensus is for the economy to slowdown a touch throughout the remainder of the year.
In India, the last quarter of 2017 was a good one – with the economy growing at 7.2 per cent year on year. You may recall, the Indian government removed certain banknotes from circulation last year, in an effort to deal with the black economy – but the Indian economy is cash dependent, and the move hit consumer spending hard. Well, the negative effects of that now seem to have worked their way out of the system. India is once again the world’s fastest growing large economy, the biggest uncertainty relates to an election, scheduled for later in the year.
Turning to the euro area, the latest PMI tracking manufacturing in the region was high, very high, but was down on the month before which was down on the month before that. Even so, the latest reading for the region has a score of 58.6, still consistent with the best run of growth for manufacturing across the region in 18 years. All countries tracked by the index did well in February, Holland saw its own PMI hit an all-time high, and even in Greece, the PMI rose to a 212-month high.
Yet, despite the apparent boom, there is little sign of inflation picking up. In fact, other data out recently, revealed a fall in euro area inflation to just 1.2 per cent, however, the PMI does point to rising input cost pressures.
To complete the story we turn to the UK.
The UK fell from the fastest growing G7 economy and one of the fastest in the EU in 2016, to the slowest growing economy in the G7 and one of the slowest in the EU in 2017.
But how is it doing this year?
Alas, not so good, the latest PMI tracking UK manufacturing fell to an eight-month low.
Rob Dobson, Director at IHS Markit, which compiles the survey said: “The PMI’s Output Index fell to its second-lowest level since the EU referendum and, based on its past relationship with official ONS data, is consistent with only a subdued 0.4 per cent quarterly pace of growth in production volumes. This would represent a marked downshift from the 1.3 per cent increase signalled for the final quarter of 2017, providing a further brake on the rate of expansion in the wider economy.
“However, positive news was provided by other survey indicators that are suggesting output growth may revive in the coming months. New orders showed the largest monthly gain since November and are outpacing the rate of growth in output to one of the greatest extents in more than a decade.”
As for the euro area, Chris Williamson, also from IHS Markit said: “Although the Eurozone Manufacturing PMI fell for a second successive month in February, the survey data indicate that factories are still enjoying their best growth spell for 18-years. The average PMI for the first quarter so far is the second-highest since the spring of 2000, falling just short of the near record peak seen in the fourth quarter of last year.”
Alas, he warned, “that growth could cool further in coming months. A slowdown in growth of new export order inflows to an 11-month low suggests that the appreciation of the euro may be starting to curb export sales. Job creation, while still among the highest seen in the twenty-year survey history, has meanwhile moderated as a result of the slower inflows of orders, adding to suspicions that the manufacturing growth peak is behind us.”