Line chart tracking U.S., Eurozone, and China purchasing managers’ indexes (PMIs). Y-axis: Composite Purchasing Managers’ Index level; x-axis: January 2019 – September 2021. Index levels below 50 indicate contraction; above 50 indicate expansion.
From late January 2019 to late January 2020, U.S., Eurozone and Chinese purchasing managers’ indexes indicated stable or expanding manufacturing and non-manufacturing activity. The U.S. led the way through most of that period with index levels in the mid-50s. The Eurozone began the period near 50 and remained at or near that level until late February 2020. China also opened the period near 50 and remained within a few points of that level until late January 2020 when it plunged into contraction, reaching an index value of 27.5 by late February 2020. In late February, the Eurozone began a similar and even deeper decline in the index level, falling below 14. And by late February 2020, the U.S. also began a less precipitous decline into contraction, from a level of 56 to just above 53 in March and then falling into contraction with a level of just under 42 by late April.
Since those declines, all three regions have shown signs of recovery. China’s PMI level rose from 27.5 to nearly 47 by late March 2020, then increased to near 55 by late April, and by the end of Q3 2021 had declined to 51. The Eurozone level also rose sharply from below 14 to near 53 in late March 2021 and rising to near 56 by the end of Q3 2021. The U.S. level rose from nearly 42 in late April 2020 to near 64 in March 2021 and declining to just under 62 by the end of Q3 2021.
Sources: Bloomberg and Wells Fargo Investment Institute. Monthly data from January 1, 2019 to September 30, 2021. PMI = Purchasing Managers’ Index. U.S. Composite Purchasing Managers’ Index level is the Institute for Supply Management Composite Index®, which is a composite index based on the diffusion Indexes of five of the Indexes with equal weights: new orders, production, employment, supplier deliveries, and inventories. Eurozone and China PMI levels use the Markit Manufacturing PMI Index, which is an index developed from monthly business surveys used to monitor the condition of industries and businesses. An index value over 50 indicates expansion; below 50 indicates contraction. The values for the index can be between 0 and 100.
Key Takeaways
- Europe’s successful effort in containing the pandemic’s latest wave has moved it to a major contributor to the global growth recovery.
- The sustainability of global manufacturing growth will depend on successful repair of the pandemic-shaken supply chains. The extent to which consumers rotate back to pre-pandemic spending patterns will impact the strength of service sector recovery.