The final PMI data for January should add to the bullish mood, with global activity now back in positive territory.
There seems to be some confusion around the China data, with most taking the opportunity to record the slight decline in the government produced PMI (50.4 from 50.6) rather than the big jump in the HSBC number, which was better again than the flash estimate produced only a week or so ago. The reality seems to be that activity is a little better, although for me the YoY gains are exaggerated thank to base effects.
The US ISM index was probably the best of the bunch, rising from 50.7 to 53.1, suggesting that the "pause" in Q4 has given way to solid gains at the start of 2013.
There was a little bit of devil in the detail, with the inventory component of the index rising quite sharply. This meant a narrowing of the new order - inventories gap, which historically is not bullish. But this maybe similar to the end of 2010, where a rise in inventories wasn't so bad because new orders stayed at high levels. This was the case in these most recent data.
The final European data were also better than the flash numbers and the details were ok. A big lift in the German index to just a touch below 50 is the big driver and as I've outlined previously, this doesn't do much to solve the problems afflicting the Euro zone. But countries like Italy and Spain also saw a pick up in their indices, suggesting growth may not be too far away.
Outside the major regions things were mostly better as well. The Japan PMI recorded welcome gains while countries like South Korea, India, Russia, Indonesia and Brazil were either stable or a little better.
So activity is on the up, but with most markets leading these improvements many maybe wondering if the good news is already baked into valuations. I would tend to say probably not, particularly given how wobbly conviction seems to be around China. We are also coming from a low base, so further improvement in places like the Euro zone shouldn't be too much of a stretch, as long as its broad based across the region.
