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Global economic recovery: From a surging start to a softer patch? 14 June 2011 Rob Dobson Agenda: Sovereign Wealth Forum Introduction to the PMIs Global economic recovery: Softening in Q2 Deja vu and current levels of recuperation 2 Introduction to PMIs Business surveys of over 18,000 companies worldwide each month Provide timely and accurate economic indicators Fill gaps in official data – Official data are often only available weeks, months or years after the PMIs – Official data are subject to significant revision PMIs can be broken down to provide an accurate representation of global and national trends 3 Sharp global growth slowdown signalled in Q2 Global GDP and the PMI Manufacturing and services GDP annual % change PMI 65.0 6% PMI 65.0 Global Manufacturing Output 5% 60.0 3% 55.0 2% 50.0 1% Global Services Business Activity 55.0 50.0 45.0 0% 45.0 -1% 40.0 -2% Global PMI Composite Output 35.0 60.0 4% 40.0 35.0 -3% Global GDP 30.0 -4% 30.0 2000 4 -5% 2002 2004 2006 2008 2010 Sources: Markit, ISM, JPMorgan, Ecowin. 25.0 2007 2008 2009 2010 2011 Developed market growth slips closer to stagnation Developed Markets Emerging Markets GDP annual % change PMI 62.0 GDP annual % change PMI 60.0 10% 4% 8% 58.0 2% 55.0 54.0 6% 0% 50.0 4% 46.0 42.0 38.0 34.0 2000 5 50.0 -2% 45.0 Developed Market PMI Output -4% Developed Market GDP -6% 2002 2004 2006 2008 2010 Sources: Markit, ISM, JPMorgan, HSBC, Ecowin. Emerging Market PMI Output 2% Emerging Market GDP 40.0 2000 0% 2002 2004 2006 2008 2010 Developed markets slowing – EZ recovery remains uneven G4 Developed Markets EZ recovery remains ‘lop-sided’ PMI Output Index (Manufacturing & Services) PMI Output Index (Manufacturing & Services) 65.0 70.0 United States Eurozone Japan United Kingdom 60.0 60.0 55.0 50.0 45.0 50.0 40.0 35.0 40.0 Germany France Italy Spain Ireland Greece (manu. only) 30.0 25.0 30.0 2007 6 2008 2009 Sources: Markit, ISM. 2010 2011 20.0 2007 2008 2009 2010 2011 UK and US PMIs retreat from ‘rate-hike’ territory UK Eurozone PMI, all sector 60 Rate change (%) 50 25 55 PMI, all sector 65 US Rate change (%) 75 50 50 60 25 25 60 0 55 0 -25 -50 45 50 -25 -75 35 -150 '98 '01 '04 '07 Eurozone PMI -100 -125 '10 50 -50 -50 45 UK PMI BoE base rate 40 7 Rate change (%) 75 50 0 -25 PMI, all sector 70 -75 ECB base rate 40 -100 35 -125 '98 '01 '04 '07 '10 -75 40 -100 US PMI Fed Target Rate 30 '98 '01 '04 '07 Sources: Markit, ISM, Bank of England, European Central Bank, US Federal Reserve Bank. -125 -150 '10 China cools as government acts to rein in growth BRIC Emerging Europe & Middle East PMI Output Index (Manufacturing & Services) 70.0 PMI Output Index 80.0 Poland Manufacturing Czech Manufacturing 70.0 Turkey Manufacturing Saudi Arabia + UAE (whole economy) 60.0 60.0 50.0 50.0 Brazil 40.0 Russia 40.0 India China 30.0 2007 8 2008 2009 2010 Sources: Markit, HSBC, SABB HSBC. 30.0 2011 20.0 2007 2008 2009 2010 2011 Fears of jobless economic recovery rise Global PMI – orders and jobs PMI New Orders Index US employment PMI Employment Index 65 58 60 55 ISM Employment Index 61 Non-farm payroll change, '000 500 58 300 55 52 55 49 50 49 -100 46 46 45 43 40 40 New business 35 Employment 30 '99 9 100 52 '01 '03 '05 '07 '09 43 40 37 34 37 31 34 28 2002 '11 Sources: Markit,JPMorgan, ISM, Bureau of Labor Statistics. -300 ISM Composite Employment Index -500 Non-farm payroll change ('000) -700 -900 2004 2006 2008 2010 Price pressures and supply chain disruptions ease Global PMI – prices PMI Input Prices Index 85 Commodity markets PMI Delivery Times Index* 37 Oil (US$/barrel) 150 Copper ($/tonne) 11000 -11.2% WTI Copper 41 9000 120 -11.6% 65 7000 45 90 5000 49 45 60 3000 53 Global Manufacturing PMI Prices Global Manufacturing PMI delivery times 25 1998 2000 2002 2004 2006 2008 2010 10 Data updated at close 3 June 2011. 57 30 2008 1000 2009 Sources: Ecowin, Markit, JPMorgan. *inverted 2010 2011 Looking familiar? PMI QE2 announced 65.0 Recovery begins 60.0 55.0 50.0 45.0 40.0 35.0 Global Manufacturing Output Global Services Business Activity 30.0 25.0 2004 11 2005 Sources: Markit, JPMorgan. 2006 2007 2008 2009 2010 2011 Recuperated or still in recovery 12 Source: Ecowin. Disclaimer Any information provided in this presentation is on an “as is” basis. Markit (including any of its affiliates) makes no warranty, expressed or implied, as to its accuracy, completeness or timeliness, or as to the results to be obtained by recipients, and shall not in any way be liable to any recipient for any inaccuracies, errors or omissions. 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