WSJ reports ''European purchasing managers indexes are up, China’s down. That bifurcation captures the shifting engines of growth in the global economy, as the second-biggest national economy’s investment and construction machines runs out of oomph while the U.S. and euro zone show the best signs yet of having put their crises behind them. In fact, it was great relief that the euro-zone data came in as strong as it did. Until then, Chinese data had sent waves of concern through global markets''.
One important question is the opposite of one that existed two years ago: Is the recovery in the advanced economies strong enough to deliver enough spillover growth to China that it can avoid a hard landing? That depends as much on the shape of consumer demand in the U.S. and Europe as it does on how far China has traveled down the path of reorienting its economy away from exports.
EUROPE: January preliminary purchasing managers’ surveys.
–EURO ZONE: Manufacturing PMI 53.9 vs. 53.0 expected and 52.7 in December; services PMI 51.9 vs. 51.4 expected and 51.0 in December; composite PMI 53.2 vs. 52.5 expected and 52.1 in December.
–FRANCE: Manufacturing PMI 48.8 vs. 47.5 expected and 47.0 in December; services PMI 48.6 vs. 48.0 expected and 47.8 in December.
–GERMANY: Manufacturing PMI 56.3 vs 54.7 expected and 54.3 in December; services PMI 53.6 vs. 54.0 expected and 53.5 in December.
All up, there were some welcome signs of further recovery in Europe in this raft of “flash” PMI reports from data provider Markit. However, it’s clear the imbalances within the euro zone persist, with German industry still the driving force while French PMI readings remain in contractionary territory – for both manufacturing and services. France and the rest of the euro zone would still prefer to see German growth less concentrated in its export-oriented manufacturing sector and more focused on consumer demand. Still, the data as whole were encouraging, as seen in the currency area’s aggregate PMIs.
