Main takeaways:
  • Global PMI continues ticked up in both developed and emerging countries.
  • But there is a clear divergence on what the PMIs suggest:
    • Developed countries industrial production growth likely to move sideways at a low pace of growth
    • Emerging countries IP growth likely to slowdown further.

Global PMI ticked up in October...

... and it was an across the board increase; but emerging markets continue to under-perform its developed peers.

This suggests industrial production in developed economies should continue to grow at just above 1%...

...while industrial production growth in EM economies should slowdown further in the coming months.

And within emerging countries, the slowdown in industrial activity is driven by Asia (China), but it rebounded a bit in October.

The EM and DM PMIs suggest a convergence of growth between the regions is likely to continue...

... and as a result global industrial production growth is likely to slowdown. The chart below shows that world industrial production is usually cyclical -- except in the unusual expansion period between Dec/2001 and Feb/2008 and in the last 4 years up to mid-2014.

The previous slowdown / contraction periods (Dec/94 to Dec/95, Oct/97 to Oct/98, Aug/2000 to Dec/01, Feb/08 to Mar/09) were all period of crisis (Mexico, Asia, Nasdaq, and the GFR) and lasted about one year. The current slowdown is shallower but is also about one year old.