PMIs point to a recovery
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The Purchasing Managers' Index (PMI) is a form of soft data that, based on surveys among business leaders, aims to anticipate trends in economic activity within a specific country. The PMI measures economic sentiment by distinguishing between the services sector and the manufacturing sector, with the composite PMI serving as an overall indicator of a country's economic growth. A value of 50 represents the threshold between an economy in contraction and one in expansion. One advantage of this indicator is its ease of comparison across different geographic areas.
Recent data from major developed countries clearly show an improving trend across all regions. Furthermore, all economies are in expansion territory, except for France, which is close to the 50 threshold. This is consistent with a phase of economic recovery. The cycle of restrictive monetary policy implemented by central banks in major developed countries is now shifting towards easing. However, in real terms, with inflation decreasing, reference rates remain positive and, in many cases, above the neutral rate. The decline in inflationary pressures is also supporting the growth of real income and the recovery of consumer purchasing power. In Japan, where the Bank of Japan did not follow other central banks in raising rates, monetary policy reference rates are negative in real terms, and inflation is still eroding consumer purchasing power, as evidenced by the first-quarter GDP data.
Examining the change in the most recent data compared to January of this year, as an indicator of economic growth momentum, it is clear that the Eurozone, after nearly a year of stagnation, is now accelerating. Conversely, the United States, which outperformed for much of 2023, has shown weaker momentum since the beginning of the year, although the U.S. data remains well above the 50 threshold. The growth rate divergence between the two regions is, however, narrowing.
In the Eurozone, Australia, and the United States, growth since the beginning of the year has been driven by the services sector, while the manufacturing sector remains weaker. In contrast, in the United Kingdom and Japan, the manufacturing sector is leading growth.
