The upbeat message from the flash PMI numbers
The numbers for the flash February Purchasing Managers’ indices, which provide early assessment of the pace of economic activity, indicate continued strong expansion in the eurozone, Japan and the US.
The flash Eurozone Composite PMI Output index, a gauge of private sector activity in both manufacturing and services, rose to a 70-month high of 56 in February. (A reading above 50 indicates expansion from the previous month).
Here’s what the Markit press statement had to say about it: “The pace of eurozone economic growth improved markedly to hit a near six-year high in February, according to PMI survey data. Job creation was the best seen for nine and a half years, order book growth picked up and business optimism moved higher, all boding well for the recovery to maintain strong momentum in coming months.”
Japan’s flash manufacturing PMI too improved to a 35-month high of 53.5 in February, with record-high business confidence among Japanese manufacturers.
In the US, the flash composite PMI came off its 14-month peak reached last month, but remained at a high 54.3 in February, indicating a solid rate of expansion. In the manufacturing sector, new order growth was the fastest since March 2015. Chris Williamson, chief economist at HIS Markit, commenting on the flash US data, said, “Even with the February dip, the PMI remains at a level broadly consistent with the economy growing at a 2.5% annualized rate in the first quarter.”
The PMIs suggest a reason why global equity markets have continued to rally, despite political headwinds—investors expect global growth to improve. This ties in with the Bank of America-Merrill Lynch survey of fund managers earlier this month, which said that optimism about macro indicators is surging.