02 Sep 2011 Purchasing managers survey makes grim reading
There was an astrophysicist, a physicist and a mathematician on a train traveling from England to Scotland. They see a black sheep in a field as they cross the border. The astrophysicist says “all the sheep in Scotland are black”. The physicist says “some of the sheep in Scotland are black”. The mathematician says “At least one sheep in Scotland is black – on at least one side”.
Interpreting what we see on limited evidence is always a risky business so let’s not get too concerned at Augusts PMI numbers.
According to surveys of purchasing managers in Asia, Europe and the US, and reported by the FT and others, manufacturing activity in August was at it lowest since mid 2009 when the world economy was on its knees. Has the global recovery has come to a grinding halt?
The figures could have been worse, indeed equity markets responded positively that to the news which was a little brighter than had been feared but despite this, there is little to be optimistic about and the survey results make grim reading. After a strong start to 2011 the manufacturing sector struggled to increase output in August. The global purchasing managers’ index (PMI) fell to 50.1 in August from 50.7 in July but how concerned should we be?
The PMIs are not fool proof and are just a one of many measures that can be used to assess the health of the economy and we need to interpret this news with a pragmatic perspective. Taking a single months figures – especially an August in the middle of a recession – is like reading fashion magazines when your on a diet – they will always tell you you need to lose more weight. Economic statistics are notoriously lumpy and we should take much of what the business soothsayers tell us with a little salt at least.