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Economic Scorecard: Green Shoots Emerging

August 21, 2019 | Global/Emerging Markets

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Our updated Macroeconomic Scorecard, a tool we use to inform our fundamental research, indicates that although growth has been weak, green shoots are emerging. We have seen improvements in manufacturing purchasing managers' indices (PMIs) in Europe and China, consumer spending across most developed markets, and retail sales in China.

The scorecard provides an easy, real-time comparison of key economic indicators across most developed markets and major emerging markets. See below for a more in-depth description of our macroeconomic scorecard and more key takeaways from our analysis.

Here are our latest insights from the macroeconomic scorecard:

    • Growth has been weak but green shoots are emerging
    • Manufacturing PMI orders minus inventories have improved in Europe and China
    • U.S. and Japanese manufacturing growth has decelerated
    • Consumer spending has improved across most developed markets
    • Chinese retail sales have improved

Scorecard Basics

Our macroeconomic scorecard consists of five panels, each of which details a single data series. The first three indicators deal with the supply side of the economy, and the last two deal with the demand side (consumer behavior). These indicators include industrial production, manufacturing purchasing managers' indices (PMIs), manufacturing PMI orders minus inventories, retail sales, and motor vehicle registrations. All of these indicators are high frequency (they come out monthly) and are available at the country level.

For each indicator, we show the annual growth rate as well as the one-month and three-month changes in that growth rate. The idea is to see whether the current rate of growth is decelerating or accelerating.

The Indicators

Industrial production. These figures can frequently move the markets because they are considered to be indicators of future inflation.

Manufacturing PMIs. This survey-based data provides clues not just about the health of the manufacturing sector, but about economic growth in general. Many investors use the PMI as a leading indicator for the growth or decline of gross domestic product (GDP).

Manufacturing PMI orders minus inventories. The most forward-looking component of manufacturing PMI, this data is a testament to how company managers think about their order books versus their current production trends. This gives us a predictable indicator of what future industrial volume growth is likely to be.

Retail sales. Retail sales are an important economic indicator because consumer spending drives much of our economy.

Motor vehicle registrations. Cars are an excellent indicator of consumer behavior. If consumers do not have sustainable income growth or credit growth, they are unlikely to purchase such a big-ticket item.

For previous analysis click here

Olga Bitel, partner, is a global strategist on William Blair's Global Equity team.