There was a period during the Great Recession when the negative news came fast — as in, every day there was a major economic shock that, in and of itself, scared the bejeebus out of market watchers. This time, the news has ground down slower; there’s been a steadily increasing amount of concerning data, primarily centered in the manufacturing sector and caused by a decrease in global trade.
Today, the Markit Economics Group released its latest Purchasing Managers Indexes for major countries and regions around the globe. These are used as barometers of activity and sentiment by traders and central banks. Let’s look at the data:
- Asia
- ASEAN PMI: 48.5, due to a drop in new orders and exports
- Japan PMI: 49.3 due to a decrease in new orders, exports, and production
- South Korea: 49 due to a decrease in new orders, exports, and production
- Taiwan: 47.9 due to a drop in new orders, exports, and production
- China 50.4 modest increase in production. Domestic new orders increased; exports decreased.
Asian economic growth is premised on exports and trading. Trump’s trade war has ground that down, causing wide-spread weakness across the region.
Europe is also hurting.
- EU PMI 47 due to a drop in new orders, exports, and employment
- Germany: 43.5 due to weak exports, production, and employment
- Spain 48.8 due to weak new orders, exports, production, and employment
- Italy 48.8 thanks to weak new orders, exports, production, and employment
- France: 51.1 — their manufacturing was up thanks to increases in consumer goods orders.
Looking at the data, you’ll notice a clear trend: export orders are down, leading to a drop in production, and, in some cases, employment. It’s not just one country: it’s two major economic regions.
And then we have today’s ISM report for the US, which, for the first time since 2016, shows a contraction.
New orders, production, and employment are all showing contraction. Yes, this is the first month we’ve seen that in the data. But the overall trend has been moving in that direction for the last 12-18 months.
This is being caused by the continued increase in uncertainty caused by Trump’s trade war. There’s no point in making any major investments if tomorrow a presidential tweet will make your plans moot. The safest court is doing as little as possible. And that’s exactly what’s happening.