Category Archives: Econ

14/10/20: BRIC: Composite economic activity indicators Q3 results


We covered in detail strong recovery in BRIC Manufacturing PMIs ( and fragile recovery in Services PMIs ( Here is a summary chart:

Now, let's take a look at BRIC Composite PMIs for 3Q 2020:

Brazil Composite PMI ended Q3 2020 on a reading of 51.6 - an improvement on 31.8 in 2Q 2020. Brazil's Composite PMIs have run sub-50 recessionary reading in 1Q and 2Q 2020, returning to growth in 3Q 2020, albeit at the levels not consistent with a V-shaped recovery.

Russia Composite PMI stood at a strong 55.9 reading in 3Q 2020, up on 32.6 in 2Q 2020 and signaling an end to 2 consecutive quarters of sub-50 readings. This marks the fastest pace of growth since 1Q 2017, but is also consistent with the levels of current activity being still below pre-COVID19 pandemic period. 

India Composite PMI remained in recessionary territory in 3Q 2020 at 45.9, an improvement on 19.9 in 2Q 2020. Overall, Indian economy has suffered the sharpest hit from the pandemic, compared to all other BRICs. It is continuing to exhibit recessionary dynamics to-date. 

China Composite PMI ended 3Q 2020 at 54.7, marking the second consecutive quarter of recover (2Q 2020 reading was 52.6). 3Q 2020 reading is the highest since 1Q 2020, and suggests that the Chinese economy is getting close to recovery in its activity levels to pre-pandemic position. 

Overall, BRIC block activity indices imply lagging momentum in the recovery in services, and faster than global pace of recovery in manufacturing. Statistically, BRIC growth momentum in 3Q 2020 is within historical average, however, growth dynamics in 1Q and 2Q 2020 were significantly below historical averages, which implies that 3Q 2020 PMIs indicate incomplete or only partial recovery in the BRIC economies post-pandemic so far.

14/10/20: BRIC: Services PMIs Q3 results


BRIC Manufacturing has rebounded strongly from thee pandemic lows, as covered in this post here: Services PMI for the BRIC economies signal similar, albeit weaker rebound in July-September:

Brazil Services PMI stayed in the recession territory in 3Q 2020, with index reading coming in at 47.5, up on 30.3 in 2Q 2020, but still marking a third consecutive quarter of sub-50 readings. Put simply, unlike manufacturing that is showing rather incredible signs of the recovery, Brazil's services sectors continue to show ongoing contraction, building on 6 consecutive months of contracting activity through August 2020. September monthly reading at 50.4 is statistically indistinguishable from zero growth line of 50.0. In summary, Brazil's services sector is not in a recovery so far.

Russia Services PMI posted very strong recovery signals in 3Q 2020, although September reading slipped to 53.7 (fast growth) from blistering 58.5 and 58.2 in July and August, respectively. 3Q 2020 Russia Services PMI was at 56.8 marking a sharp turnaround from 36.0 in 2Q 2020. This is the fastest pace of quarterly expansion since 1Q 2017.

India Services PMI remains in contraction, with 3Q 2020 reading of 41.9, an improvement on sharper rates of deterioration in 2Q 2020 at 17.2. September marked seventh consecutive month of sub-50 readings in Services sector in India.

China Services PMI came in at 54.3 in 3Q 2020, up on 52.6 in 2Q 2020, marking second consecutive quarter of recovery from the pandemic lows of 1Q 2020 when the index fell to 40.4. 

Overall, BRIC Services Activity Index - an index compiled by me based on GDP shares and Markit monthly PMI data - rose from 40.4 in 2Q 2020 to 51.0 in 3Q 2020. Given the nature of PMIs as signals of monthly changes in activity, 3Q 2020 reading is consistent with the BRIC block services sectors recovering only partially from the pandemic lows. BRIC Services Activity Index ended 3Q 2020 at the levels slightly below the Global Services PMI which stood at 51.4. Global services sectors are also showing more rapid rate of quarterly recovery, rising from 35.6 in 2Q 2020 to 51.4 in 3Q 2020.

12/10/20: Ireland PMIs and Economic Activity Dynamics for September


September data on Irish Purchasing Managers Indices is now complete (with Construction sector reporting last), and the signals coming from the data are not pretty:

Services sector activity is back in contraction: September reading of 45.8 shows relatively sharp downward momentum, swinging 6.6 points on August reading. September reading is statistically below 50.0 zero growth line, and below historical mean (55.0).

Manufacturing sector reading is at stagnation 50.0 in September, down from 52.3 in August. Statistically, September reading is below historical average of 51.4.

Construction sector is posting a second consecutive month of contraction at 47.0 in September. The reading is statistically below both the historical mean and the median, as well as below 50.0 zero growth line.

This means that official composite PMI (which does not include Construction sector index) is now at 46.9, statistically signalling economic contraction. September index is statistically below index median, although it is statistically indistinguishable for the historical average (which, owing to massive volatility in recent months sits at 49.8).

Chart above shows my own 3-Sectors Index of economic activity, integrating Manufacturing, Services and Construction sectors PMIs, weighted by their relative contributions to Gross Value Added. 3 Sectors Index has fallen from 52.1 in August to 47.5 in September. August reading by itself was not impressive: it was statistically below the historical average and the median, and was barely statistically significantly above 50.0 zero growth line. September reading is very poor, indicating a return of recessionary dynamics in the Irish economy in a critical month of September that normally marks strong growth month for the economy.

2/10/20: A new mortgage arrears crisis on its way


My latest article on Irish banking sector problems with distressed mortgages is out today in The Currency

There’s a new mortgage arrears crisis on its way, and official Ireland is not ready for it

The Central Bank of Ireland has started publishing new data on mortgage arrears – and the news is not good. An arrears crisis is brewing. The banks, and the state, are woefully unprepared for it. 

22/9/20: COVID19 Update: German Economic Growth Forecasts 2020-2022


Germany's ifo Institute published their forecasts for 2020-2022 today. These represent an improvement on Summer forecasts, but continue to show big impact of the COVID19 pandemic lasting beyond 2021:

Private consumption is expected to be 0.82 percentage points below 2019 at the end of 2022, and barely in line (0.78 percentage points above) with 2018 levels. GDP is forecast to reach 1.34 percentage points above 2019 levels in 2022. Employment levels are projected to stay below 2019 levels through most of 2022, and unemployment numbers are expected to stay above their 2019 levels through the entire 2022. General Government deficits will remain in 2020, 2021 and 2022.

Using pre-2020 trend growth, German economy would have been 1.66 to 1.85 percentage points ahead of the GDP levels now forecast for 2022, which means that under the current forecasts, we can expect recovery to the pre-COVID19 trend GDP by the end of 2024. This assumes ca 1.7 percentage points growth over 2023-2024 horizon, which may be quite optimistic, given prior trend growth rates of 0.975% pa. 

ifo forecasts note the state of economic uncertainty: "The degree of uncertainty in our forecasts is enormous because nobody knows how the coronavirus pandemic will develop, whether there will be a hard Brexit after all, and whether the trade wars will be resolved". Which, of course, highlights the environment of VUCA that we are living in.