While PMIs (UBS weighted all economy estimate based on AIG data) ticked up m/m in Feb-19, they remain near a ~6-year low (45.1, after 44.6), & the trend is clearly weaker in Q1-19 than Q4-18 (50.9), suggesting momentum slowed further post weak Q4 GDP. Indeed (& worryingly), the new orders-to-inventories ratio collapsed to a ~record low. Even employment has been in contraction for 3 months, the worst since May-16.
Take a close look at the bottom of that right hand chart. If this goes on for much longer without some new support to domestic demand then we’ll get an inventory liquidation and crash into recession as production stalls and unemployment spikes.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
