Monday’s (23 August 2021) PMI (Purchasing Managers’ Index) data was both positive and well-timed given all the recent media headlines talking about another global growth contraction, or at the very least, a slowdown – due to the rapid spread of the Delta variant.
While manufacturing PMI readings did slow across all the major geographies, it was very marginal. For example, here in the UK the reading slowed from 60.4 to 60.1.
Not only have we rarely seen data readings consistently at these levels, but more importantly, as 50 is the line separating expansion and contraction, it clearly indicates to us there is a strong and ongoing recovery in global demand.
Unfortunately, this positive data has been overshadowed by speculation of what Jay Powell, the Fed Chair, may or may not say on Friday (27 August 2021) at the annual Jackson Hole Economic Policy Symposium.
While most Fed policymakers have hinted at a tapering of US monetary policy in the coming months, we believe the speed of the tapering is more important than a start date – and so we will be listening out for: one, reassurances that the process will be managed gradually, especially if the Delta variant does start to complicate the economic outlook; and two, comments on potential interest rate increases, which we believe should be a long way off.
Investment Management Team