Category Archives: Econ

6/1/21: BRIC: Composite Economic Indicators: 4Q 2020

Now, Composite PMIs:
  • Brazil Composite PMI rose from 51.6 in 3Q 2020 to 54.4 in 4Q 2020, marking second consecutive quarter of > 50.0 readings. Average 4 quarters PMI stands at 46.2, suggesting that Brazil's economy has not, yet, recovered fully from the Covid19 pandemic impact. Nonetheless, statistically, both 3Q and 4Q readings are signaling economic expansion and 4Q growth in Brazil's economy appears to be faster-paced than global (global composite PMI was at 53.3 in 4Q 2020).
  • Russia Composite PMI is in a contraction territory, with 4Q 2020 reading of 47.7, down from 55.9 in 3Q 2020. Over the course of 2020, Russia Composite PMI averaged 46.0, the second weakest in the BRICs group. At 47.7, 4Q 2020 PMI is exactly in line with 1Q 2020 PMI.
  • India Composite PMI rose from 45.9 in 3Q 2020 to 56.4 in 4Q 2020, signaling rapid bounce back in the economy, that, nonetheless continues to suffer from the pandemic-induced economic crisis. Full year 2020, Composite PMI average is at 44.3, by a distance, the lowest in the BRICs group. 
  • China Composite PMI rose from 54.7 in 3Q 2020 to 56.3 in 4Q 2020, marking third consecutive quarter of economic growth, with full year PMI averaging 51.4, suggesting that the Chinese economy has now recovered fully from the Covid19 pandemic impact. 

Overall, three out of four BRIC economies posted 4Q 2020 Composite PMI above Global Composite PMI: Brazil, India and China, with Russia being the only BRIC economy posting both sub-Global and sub-50 Composite PMI reading at the end of 2020. Only one BRIC economy has, so far, signaled full recovery from the Covid19 crisis shock: China, with all other BRICs still recovering from the pandemic.

Given that both BRIC Manufacturing Sector Activity Index (54.9 in 4Q 2020) and BRIC Services Sector Activity Index (54.8 in 4Q 2020) are above Global Manufacturing (53.5) and Services (52.3) PMIs, BRIC economies as a group have supported global economic growth to the upside in 4Q 2020. In contrast, BRIC Manufacturing Activity Index outperformed Global Manufacturing PMI in 3Q 2020 (53.0 to 51.6), while BRIC Services Activity Index (51.0) underperformed Global Services PMI (51.4). 

6/1/21: BRIC: Services PMIs: 4Q 2020

 

BRIC's manufacturing PMIs for 4Q 2020 were covered here: https://trueeconomics.blogspot.com/2021/01/4121-bric-manufacturing-pmis-4q-2020.html. Now, to Services PMIs:

  • Brazil Services PMI rose from 47.5 in 3Q 2020 to 51.4 in 4Q 2020, with aggregate 2020 levels of activity still significantly below 2019 levels. At 51.4, the index is barely statistically above 50.0 (95% confidence bound is 51.3). However, the latest quarterly reading is the first nominally above 50.0 after three consecutive quarters of sub-50 readings. 
  • Russia Services PMI crashed in 4Q 2020 from 56.8 in 3Q to 47.7. Statistically, Russian services sector is contracting and it is contracting rapidly. In the entire 2020, there were three quarters of deeply sub-50 readings against one quarter of above 50.0 expansion. Services sector reading is basically identical to 47.6 recorded in Manufacturing sector, which means that in 4Q 2020 there was no 'comfort zone' in the Russian economy in terms of growth.
  • India Services PMI rose significantly in 4Q 2020 compared to 3Q 2020, from 41.9 to 53.4.  However, this growth is unlikely to bring India's services activity anywhere near pre-Covid19 levels. 
  • China Services PMI rose for the third consecutive quarter in 4Q 2020. In 2Q 2020, China's Services PMI was at 52.6, which increased to 54.3 in 3Q 2020 and to 57.0 in 4Q 2020. Nonetheless, it is still doubtful that Chinese services activities have fully recovered from the pandemic as of the end of 2020.
  • Overall, BRIC Services Activity Index based on PMIs and respective GDP shares in the global economy rose for the second quarter in a row from 51.0 in 3Q 2020 to 54.8 in 4Q 2020. This marks some recovery from the Covid19 pandemic impact, although this recovery remains incomplete. BRICs have - as a group - outperformed Global Services PMI which rose from 51.4 in 3Q 2020 to 52.3 in 4Q 2020.

5/1/21: Ireland PMIs: 4Q 2020

Ireland's economic activity improved significantly in December, and the improvements were marked across all three sectors:

  • Ireland's Manufacturing PMI rose 52.2 in November to 57.2 in December, marking the third consecutive month of > 50 readings, the second consecutive month of indicator being statistically above 50.0 line. The last three months average (53.23) is on 2Q 2020 average (53.30) and this is pretty encouraging, given the weakness in the indicator over 1H 2020. 
  • Ireland's Services PMI also rose in December, reaching 50.1 from recessionary 45.4 in November. 4Q average is still weak at 47.9 (contractionary) after being effectively stagnant at 50.03 over 3Q 2020. Monthly increase in December, however, is a brighter spot.
  • Ireland's Construction sector PMI (data through mid-December) is at 53.5, which is strong compared to month prior (48.6) and the first time the index is above 50 line since July 2020. 
  • Official Composite PMI that accounts only for two sectors of activity (Manufacturing and Services) is now at 53.4, having broken above the 50.0 line for the first time since August 2020.

As you know,  I calculate my own index of economic activity based on all three sectors PMIs and using relative weights of each sector in Irish Gross Value Added, based on the latest National Accounts data. This is plotted against Markit's Composite PMI in the following chart:

Just as Composite PMI, my index of economic activity also rose in December (to 52.9) from 48.2 in November. This marks the first month of above-50 readings after 3 consecutive months of contraction. Nonetheless, 4Q 2020 index is at 50.03 - signaling zero growth q/q and this stands contrasted to 3Q 2020 reading of 51.2 (statistically zero growth, nominally, weak positive growth).

3/12/20: Ireland PMIs: November

 

Ireland PMIs are out for November and they show the impact of the re-amplification of COVID19 impacts on the economy.

Services PMI fell from 48.3 in October to 45.4 in November, the lowest reading in 5 months and the third consecutive monthly reading sub-50. The pandemic period average is now at 39.3.

Meanwhile, Manufacturing PMI rose from 50.3 in October to 52.2 in November, marking the second consecutive month of readings above 50.0 mark. Pandemic period average is now at 48.2. 

Construction sector PMI (through mid-November) is at 48.6 - marking third consecutive month of sub-50 readings.

As the chart below illustrates, Manufacturing is the only sector that is providing growth momentum in the economy and much of that is down to multinationals. In services sector, activity of multinationals (which are doing well) is more than offset by continued declines in activities of domestic enterprises. 


Composite PMI posted a third consecutive month of sub-50 readings at 47.7 down from 49.0 in October. Markit's Composite PMI is calculated based on manufacturing and services indices. To rebalance the overall activity measure to include construction PMIs, I calculate my own 3-sectors index which is based on each sector contribution to Ireland's gross value added. With economic activity shifting toward manufacturing during the Covid19 pandemic, this index is becoming more weighted to reflect manufacturing sector PMI, hence the 3-sectors index rose in November to 50.2 from 49.7 in October.


Overall, the PMIs and my 3-sectors index are all pointing to entrenchment of the Covid19 pandemic headwinds in the Irish economic activity in November.