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05 January 2021

Global data shows promise despite uncertainty

Ben Staniforth, Investment Research Analyst

Global Purchasing Managers Index (PMIs) readings, a signal of economic activity, continued their stay in expansion territory, signalling a continued rebound for corporates, despite a poor economic backdrop. There was, however, a number of caveats with the data which may paint a slightly rosier picture than the actual truth.

The US and UK continued to show growth in manufacturing, with the US PMI at a six-year-high of 57.1, and the UK PMI at a three-year-high of 57.5. With the Brexit deal finalised, companies were keen to bring forward their orders to beat the deadline, with the potential deal or no deal outcomes both creating more paperwork and red tape for companies than with the United Kingdom’s previous deal with the EU. The skewing of December’s data due to the Brexit deadline means that while it is encouraging to see a strong PMI reading after a poor year, this does not necessarily mean that manufacturing in the UK is fully back on track. The COVID-19 pandemic still persists, and companies will take time to fully integrate the new Brexit arrangements into their processes.

Similar to the UK, the PMI reading for the US was strong, but does not show the whole picture. While again, the reading was encouraging, an uneven rebound illustrates the widening gap between those companies that are prospering during the pandemic and those that are struggling. Consumer goods saw weaker order flows on the back of local lockdowns and reduced consumer spending, while construction machinery continued to benefit from the ongoing growth in the housing market, one of the few cyclical sectors that has held up well despite the pinch the pandemic is causing on purse strings.

China bucked the trend, however, while also showing growth with their PMI reading above 50, manufacturing activity did slow from November. The country has been praised for its handling of the pandemic. Despite its large population, COVID infection rates remain low, allowing factories to remain open and businesses to continue growing. The slight decline in December is likely due to weakening demand overseas due to reduced consumer spending, an area on which China’s manufacturing sector relies.
Global data shows promise despite uncertainty
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