Global industrial activity has wobbled a little in the last few months, although there are signs that things have stabilised in the last few months. There are still areas of concern, mostly coming from the ongoing risks from the weak Chinese housing market and the deceleration of activity in the Euro area. But any potential fall out from these risks is unlikely to be immediate.
Most the leading indicator data has been ok in the last couple of months. Both Chinese PMIs have lifted in the last 2 months, suggesting efforts by policymakers to boost activity are working, although may not be long lasting.
It's also notable that the Chinese export index (which isn't part of the headline PMI) was much stronger in June. Better export growth has been curiously missing for a while in China, despite the improvement seen in global activity.
This may be the first signs of better global trade activity, which has been relatively slow for the last 12 months.
US manufacturing has continued to bounce back from its winter lull, with the ISM index remaining at a decent level (although not as high as the end of 2013)
The OECD leading indicators are designed to track GDP rather than industrial activity, but trends are fairly similar in the last few years. It's important to not that the leading indicator for the US has only wobbled slightly in Q1 as GDP was sharply negative, suggesting that it was largely down to the impact of a very cold winter rather than a loss of momentum.
The Euro area data is more divergent. The OECD data continue to show that the rate of increase has slowed, but growth is still looking to be above-trend.
The PMI data, however, tell a different story for the manufacturing sector. The recovery from the recession has not been strong at all and looks like it is losing more momentum in June.
When aggregating the OECD indices, it suggests the developed world continues to do pretty well. The small fall in the second derivative at the start of the year has only so far proved to be temporary.
For commodities and markets in general, it still looks like the best period is behind us, when activity accelerated in 2H13.
But the stability seen in the data in the last few months suggests some of the immediate fears surrounding a slowdown in demand growth maybe overdone. This is certainly contributing to the pick up in metals prices in the last few weeks.
But just because some risks haven't materialised yet, doesn't mean they won't. So I don't think its good timing for a long term bet on metals, but in the near term there is reason to be optimistic.
