By Jeffrey Snider
While Markit's economic sentiment surveys had been perhaps a touch more optimistic about the state of the world than others or other data, May has been a rough month for that comparison. Again, it's not the absolute number calculated for each survey but rather the relative direction and, in these cases, the uniformity of that direction or pattern.
PMI data point to Japan's all-important manufacturing economy suffering its steepest downturn since late 2012. The Nikkei Flash Japan Manufacturing PMI fell from 48.2 in April to 47.6 in May, its lowest since December 2012.
However, the survey's sub-indices tell a more detailed story, in which exports are slumping at the fastest rate since early-2013 as yen strength hits competitiveness. The strong currency is also keeping inflationary pressures down, with input costs continuing to fall at one of the steepest rates seen since the height of the global financial crisis. Further falls in survey indices of new orders, backlogs of work and purchases of inputs all point to the downturn persisting, and possibly accelerating further, in June.
The survey data, therefore, raises worries that the surprise upturn in Japan's economy in the first quarter, when GDP rose 0.4%, may prove frustratingly short-lived.
It wouldn't actually be surprising at all if Japan's Q1 GDP was not a significant indication of true economic direction.
A disappointing flash eurozone PMI for May adds further to the suggestion that the robust pace of economic growth seen in the first quarter will prove temporary.
The Markit Flash Eurozone PMI - which is based on approximately 85%-90% of normal final monthly replies - slipped to a 16-month low of 52.9 in May, down from 53.0 in April. Economists were expecting an improvement to 53.2, according to a Reuters' poll. Expectations were exceeded in both France and Germany, leaving the survey data suggesting that the 'periphery' underperformed relative to expectations.
It does seem to be a suspiciously consistent theme, including US surveys and data: "temporary", as in rebound not weakness.
UK economic growth slowed sharply in April according to the PMI surveys, suggesting the second quarter could see GDP growth weaken further compared to the 0.4% expansion seen in the first three months of the year.
The three Markit/CIPS PMI surveys collectively indicated the weakest rate of expansion since March 2013, with growth slowing across the board. The combined Output Index fell from 53.6 in March to 51.9 in April. The latest reading is consistent with a near-stalling of economic growth, down to just 0.1% in April.
The manufacturing part of the PMI composite actually fell below 50 in April, the lowest level since 2012 before the positive numbers of the European post-2012 "recovery." PMI's are what they are, meaning they are only worth paying attention to when they take significant changes across many different regions or economic subsections.