Why are Global PMI’s rising when the naysayers predict imminent economic collapse?

Video transcript:

Today is Wednesday 4th January 2017 and we are asking the question why is it with all the doom and gloom merchants predicting global economic collapse the PMI data for the world’s major economies is on the rise?

For reference PMI is an indicator of the economic health of the manufacturing sector. It is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

It is reported today that businesses across the euro zone ended 2016 by ramping up activity at the fastest pace for five-and-a-half years, as a weaker currency boosted demand for their goods and services in December.

e euro zone rose to 54.4 in December from November's 53.9. which itself was the highest level since May 2011.

Chris Williamson, chief business economist at IHS Markit commented:

“Manufacturers and, to a lesser extent, service sector companies are benefiting from the weaker euro, which is both boosting goods exports and encouraging demand for services exports such as tourism.”

He also added that the data points to fourth-quarter economic growth of 0.4% which is in line with the prediction in a Reuter’s poll last month.

In the United States, The Institute for Supply Management’s Manufacturing PMI rose to 54.7 in December of 2016 from 53.2 in November, beating market expectations of 53.6. It is the highest reading since December of 2014 as new orders, production and employment all registered new highs for the year.

In the United Kingdom, activity in Britain's construction sector expanded at the fastest rate in nine months in December, boosted by more house building, but sterling's weakness drove the biggest rise in costs in over five years.

The Markit/CIPS purchasing managers' index (PMI) rose to 54.2 in December, its strongest since March and well ahead of expectations predicted in a Reuters poll for it to hold steady at November's reading of 52.8.

Britain looks to have been one of the strongest-performing advanced economies last year, but most economists predict a slowdown in growth to 1.1% this year from double that in 2016 as inflation climbs.

In China, the Caixin Manufacturing PMI rose to 51.9 in December of 2016 from 50.9 in November, beating market consensus of 50.7. It was the sixth straight month of growth and the highest reading since January 2013, as output and new orders both hit multi-year highs while new export orders remained unchanged. In December, output rose the most in 71 months while new orders increased at the fastest pace since July 2014.

Now of course the data may be wrong. Perhaps Fake News is being broadcast. Or could it possibly be the case that things are slowly starting to improve? Whether one believes the underlying data to be accurate or not, the trend is certainly clear – an improving one – as the data metrics calculations have not changed for some time and so watching the trend as opposed to the figures, present a relatively clear picture.

That said, inflation is beginning to rise because of weaker currencies and cost push inflation takes a little time to work through the system. We are not saying for one moment the economic news is great, however we are also not saying its anywhere near as terrible as some make it out to be. Yes if you are unemployed or disabled you are suffering. Yes if you live in the wrong State you are suffering. Yes if you are working in a low paid unskilled job you are probably suffering. But this has always been the case regardless of which area of the world you live in.

There are debt problems to contend with, there are political problems on the horizon and there are currency issues to worry about, however at least for now the PMI trajectory is upwards and suggests improvement.

This is likely to be better for silver than for gold should we witness a rise in industrial usage. Much can happen to derail any progress, but we most certainly do not believe the Armageddon warnings that are being pumped out right now as they are at the start of every year that we can recall.

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Disclaimer:

Illuminati Silver owners come from a background of Banking, International Wealth Management and Economics. Having now retired from these worlds we are not qualified to give investment advice. Therefore, this and other productions must not be deemed to be giving such advice and merely represent the personal views of its owners.

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