Encouraging Trends in Global PMI

April 28, 2017

Our chart of the week highlights the recent trend of expansionary PMI readings seen across major global economic areas. PMI, also known as the Purchasing Managers’ Index, is a monthly sentiment reading which provides information on current conditions within the manufacturing sector. A reading above 50 indicates that the manufacturing economy is expanding, while a reading below 50 points to contraction in manufacturing. PMI covers activity only within the manufacturing sector, but is considered a leading indicator since contractions in PMI have historically preceded recessions.

As seen in the chart above, an increase in the pace of manufacturing growth has taken place globally since the second half of 2016. Although readings in some regions show a slower short-term rate of change, PMI readings remain well within in the expansionary zone of above 50. Given that we are in one of the longest duration bull markets in history and equity valuations are at the upper end of their historical ranges, it is encouraging to see an improvement such as this in the global economic picture. The recent uptick in manufacturing growth may help to provide an added tailwind for the current economic expansion and bull market.

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