We’re not near recession-levels

A favourite set of indicators I watch globally are the business conditions PMIs (or Purchasing Managers Indexes) that are released each month. These give a timely guide to business conditions and confidence. Changes in direction for them can give a guide to which way individual economies and the global economy are heading. In recent times, there has been a softening in readings for manufacturing and services conditions as the slowdown in China weighed and this has been accentuated by weaker manufacturing conditions in the US as oil-related investment slowed and the high $US weighted. However, as can be seen in the next chart they are a long way from levels normally associated with global recession. The key going forward is that they soon bottom out and start to improve much as occurred over the 2011-2012 period as opposed to what happened in 2008 when they just slid away. The fact that there has been no aggressive monetary tightening, that there have been no excesses (e.g. inflation, excessive investment in housing or rapid debt growth) augurs well on this front. (Dr Shane Oliver, Chief Economist)