What this chart shows

The chart shows data from the manufacturing and services purchasing managers’ indices (PMIs) which are often used as indicators of future economic growth and an indication of broad economic health. A reading above 50 (shaded in green) suggests the sector, manufacturing or services here, is in expansionary territory, a reading below 50 (shaded in red) points to contraction whilst a reading of 50 (yellow) indicates no change from the previous month.

With the services sector heavily dependent on human interaction, the services PMIs have recovered significantly since the height of the pandemic last year and the third wave of lockdowns experienced earlier this year. Despite concerns of slowing economic momentum in recent months, PMIs have remained resolute, with only one country in our sample here below the 50 mark at present in either services or manufacturing. 

Why is this important?

Supply chain issues around the world are a demonstration of how demand has recovered from the pandemic at a faster pace than supply. This is echoed through some of the manufacturing PMI readings we have seen in Europe recently which have rolled over from summer highs. However, the US services PMI reading for October jumped to an all-time high of 66.7 from 61.9 in September and the UK services PMI rose sharply to 59.1 (its highest in three months), driven by a strong revival of economic activity.

Whilst headline economic growth may have slowed in some regions of late, weighed down by the delta variant of coronavirus and aforementioned supply chain issues, the PMIs continue to paint a positive backdrop for economic growth as we come to the end of 2021. A normalisation of these supply chain disruptions as the impacts of the pandemic progressively fade will be supportive for the global economy as we head towards 2022.

Source: Bloomberg Finance L.P., Momentum Global Investment Management.
Research Date: November 2021