Mondial Chart of the Week: The COVID-19 Impact on PMIs



(Source: Momentum Global Investment Management)

15 April 2020


The COVID-19 Impact on PMIs



Source: Bloomberg & Momentum Global Investment Management


CONTENT:

  1. What this Chart Shows

  2. Why this Chart is relevant


What this Chart Shows

This week we thought it would be suitable to revisit the global purchasing manager indices (PMIs) heatmap in light of recent data releases. To briefly recap, the PMI figures provide an indication of the current economic health of different sectors within a country. The indices assess market conditions across several different variables, as viewed by a large number of business executives, and whether they are expanding (>50), contracting (<50) or remain the same (50) from the previous month. They provide a strong measure of the current business environment and an indication of future business conditions. In the heatmap above a score of 50 is shaded yellow, whilst scores below 50 are red and scores above 50 are green. We have included the numerical values for the first three months of 2020. When we last discussed this topic in October 2019, we mentioned the manufacturing sector (particularly in Europe) had been contracting for some time, whilst the services sector had been largely resilient. The COVID-19 pandemic has led to the fastest falls in PMIs ever within the service sector with subsectors such as restaurants, hotels and transport severely impacted. Whilst the manufacturing sector was in a weaker position coming into the year, it hasn鈥檛 suffered the falls witnessed in the services sector, likely because households have still demanded many of the goods that they purchased before the pandemic.


Why this Chart is relevant

There are some interesting takeaways from this chart. Looking at the figures for China, where the first cases of coronavirus were identified and a country that has now reopened following its lockdown, their manufacturing PMI only entered contractionary territory for one month before showing a strong rebound (though of course, an increase to 50 suggests no change from the previous month, rather than outright expansion). With services in China remaining in contractionary territory despite a sharp rebound in March, April鈥檚 data will be hotly anticipated as that will reflect conditions after lockdowns have been eased there. Thus, China provides a model for what the western world might witness over the coming months as lockdown measures are gradually scaled back and eventually removed.

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