The latest round of PMI data were on balance better than last month, with Chinese and US data improving and Japan showing stabilisation following the crunch in May. Momentum in Europe, however, is poor considering the starting point.
The rise in both the official and HSBC China PMI suggests activity is perhaps a bit more stable than many have been fearing. For example, the current trajectory of the PMI data is better than the same period in 2012.
It is notable that the export index remains at sub-50 levels despite the ongoing improvement in developed economies. We have yet to see a bounce in the Chinese external sector, even though the RMB is weaker.
Its encouraging that the Japanese PMI is showing signs of stabilisation after the VAT hike induced fall last month. Perhaps the Japanese economy has a bit more resilience than many believe, although its only early stages.
Not so encouraging is the lower levels of activity seen in the Euro area. Activity was never particularly strong coming out of the recession and is now losing momentum. This reinforces the need for more action from the ECB.
The release of the US ISM index was a farce, with ISM incorrectly applying seasonal factors in the first release. In the end, it was stronger along with better new orders and production indices.
It does appear that US manufacturing has a bit of momentum bouncing out of the winter doldrums.
The stable China data is clearly welcome for commodities given its the centre of concern for metal markets. Ex-China demand has been somewhat of an afterthought given its been steadily positive.
The most recent data show thats still the case, although momentum is not particularly great, particularly in Europe. This is not the main game for commodities like copper, but is important at the margin, particularly for stocking activity.
