Concerns over economic “soft patch” appear overblown

Data displayed by Prieur du Plessis on his excellent website (here) does a good job tracking the global trend in the purchasing managers’ index for the major countries.  The slowdown in the U.S. PMI number early this month has fueled concerns of economic weakness and contributed to the recent stock market correction.  As can be seen below, Japan dropped into contraction (below 50 on the index level) following the recent earthquake and nuclear accident.  Their slowdown has been largely to blame for a significant slowdown in the U.S. auto industry and hence- the U.S. PMI metrics.  As can usually be said – “this too shall pass”.  The commentary from Prieur is encouraging . . . “Despite the markets showing their dismay when the manufacturing PMIs for May were published, the pace of expansion in the global economy has actually picked up. The JPMorgan Global Composite PMI, which takes the manufacturing and non-manufacturing/services into account, rose to 52.6 from 51.8 in April (a number above 50 indicates expansion) as the turnaround of Japan since the twin disasters seems to be lending solid support”.  The sharp upturn by Japan may cause a reversal in the U.S. PMI when reported in early July.  Jeb Terry, Sr. June 14, 2011

Source: Prieur du Plessis, Investment Postcards from Cape Town

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