Global Manufacturing Recession Should Ring Alarm Bells

Manufacturing and Services PMI data out of Europe yesterday was truly alarming. Confirming a world wide recession in Manufacturing is upon us. And no one is talking about it?

Eurozone Manufacturing PMI languished at a disturbing mere 43.7. The composite PMI plummeting to just 47.0 as well.

EU Composite PMI

S&P Global US Factory Activity Index fell to 47.0. US Manufacturing has been in recession all year, and now we have EU data confirming further already significant contraction in the manufacturing sector there. Both Germany and France look particularly worrisome. Germany has been fully in recession, and Italy is now in negative GDP growth.

US S&P Factory Activity

As we all know, China is spiralling right now and no body knows where it is going to end. I have said before that China’s collapse in exports again is more of a signal for what is going on in terms of the global demand matrix. It is collapsing.

The world’s three largest manufacturers, China, EU and the US are all in serious manufacturing recession. What does this say about the likely state of the global manufacturing sector? It can only add up to the observation that global manufacturing is right now in contraction and possibly a lasting recession. Eventually the global data will confirm this.

At the same time as serious manufacturing contraction over a sustained long period of time already continues, we also have the property markets of both China and the US in what is approaching a free fall moment.

Does this not sound ominous to anyone? Yet, why isn’t anyone else highlighting this as I am and dramatically so?

The non-heralding of such global impact developments is a serious dis-service to all investors. There are problems ahead and there is absolutely no way equity markets will be able to avoid, look away form, such realities for very much longer.

My fear is that a very serious market crash, more profound than I had previously anticipated, is now a far greater risk than any of us should be comfortable with.

To mindlessly follow the Wall Street style ivory tower positive spin doctors higher at this point is fraught with very real danger.

The 1929 stock market crash and Great Depression were preceded by a collapse in manufacturing. The manufacturing sector had telegraphed long and hard that there were real problems in the real economy. Yet, Wall Street mindlessly partied on.

The similarities are startling. A new technology, then the wireless radio, allowed previously unheard of access to wider markets and new marketing techniques to boost consumerism were fast tracked. Then, the broad based  popular pastime of ever higher debt levels to finance more and more share buying. Reaching a crescendo just as the manufacturing sector began to collapse.

It took some time for the full ramifications of the manufacturing collapse to reach Wall Street. There was plenty of time to take profits and get out of the market.

But, few did.

Clifford BennettACY Securities Chief Economist

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