BRIC Composite PMI 3Q: Failing Global Growth Momentum

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Global Composite PMI came in at 53.7 in 3Q 2017, matching exactly 1Q and 2Q 2017 readings and basically in line with 53.6 reading in 4Q 2016. In other words, Global Composite activity PMI index has been showing relatively robust growth across the two key sectors for the last 4 quarters running.

In contrast to Global indicator, BRIC economies posted relatively underwhelming performance with exception of Russia.

• Brazil Composite PMI index stood at 50.0 (zero growth) in 3Q 2017, which is a marginal gain on 49.8 in 2Q 2017. This marks the first time since 1Q 2014 that Brazil Composite indicator reached above the outright contraction levels, but it is a disappointing reading nonetheless. For one, one quarter does not signal stabilisation in Latin America’s largest economy. Worse, Brazil’s economy has been performing poorly since as far back as 2H 2011. It will take Brazil’s Composite index to hit above 52 mark for 2-3 consecutive quarters to start showing pre-2011 levels of activity again.
• Russia Composite PMI, on the other hand, remains the bright spark in the BRIC’s dark growth universe. Although falling to 4 quarters low of 54.1 in 3Q 2017, the index remains in strong growth territory. 3Q 2017 marked 6th consecutive quarter of robust post-recession recovery, consistent with 2.5-3 percent growth in GDP, quite ahead of the consensus forecasts from the start of 2017. The last quarter also marks the sixth consecutive quarter of Russian Composite PMIs running above Global Composite PMIs. This means that for the last 18 months, Russia has been the only positive contributor to Global growth from amongst the ranks of the BRIC economies.
• China Composite PMI firmed up in 3Q 2017, rising to 51.9 from 51.3 in 2Q 2017. 3Q 2017 reading was, however, the second weakest in the last four quarters and suggests relative weakness in the growth environment.
• India composite PMI fell below 50.0 mark in 3Q 2017, reaching 48.7 – a level signifying statistically significant contraction in the economy for the first time since 4Q 2013. The robust recovery in 2Q 2017 put India Composite PMI at 52.2, but this now appears to be a blip on the radar which shows anaemic growth in 4Q 2016 and 1Q 2017.

As chart above clearly shows, the growth dynamics as indicated by the Composite PMIs have been weak in the BRIC economies over the last 4 consecutive quarters. This is highly disappointing, considering that 4Q 2016 held a promise of more robust expansion. Russian growth conditions have now outperformed Global growth dynamics in every quarter since 2Q 2016, although the latest reading for PMIs suggests that this momentum has weekend in 3Q 2017. In fact, Russian data is quite surprising overall, showing growth conditions largely in line with pre-2009 levels since 4Q 2016. This is yet to be matched by the GDP figures, suggesting that something might be amiss in the PMI data.

Finally, the chart above shows sectoral dynamics for BRIC group of economies in terms of PMI indices. Both Services and Manufacturing PMIs for BRIC grouping are now running close to or below statistical significance levels for positive growth. More importantly, on-trend, current performance remains within the bounds of growth consistent with H2 2013-present trend: shallow, close to statistically insignificant expansion, that is distinct from robust growth in pre-2008-2009 period and the short period of post 2009 recovery.

Thus, PMI data still indicates that BRIC economies currently no longer act as the key drivers of global growth.

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