SCDigest Editorial Staff

The economic news of late has been mostly positive, as the Purchasing Management Indices (PMI) in both the US and most of the rest of the globe showed strong performance in October. However, for most developed economies, getting back to pre-recession levels more than two years after the downturn began is turning out to be a difficult haul.

In the US, the October PMI (from the Institute for Supply Management) was up 2.5 points to a level of 56.9. Using the "diffusion index" approach of the PMI methodology (see Understanding the PMI and other Indexes from the Institute for Supply Management), any score above 50 means the economy is expanding. If the index also increases from the previous month, that means the economy is expanding at a faster rate than the month before.

The global manufacturing index from the research group at investment bank JP Morgan, which provides an aggregate global score based on PMI levels from countries across the globe, increased in October for the first time since April, rising to rose to 53.7 from 52.5 in September. However, JP Morgan’s economists believe that the jump in the October number is just a blip, and that global manufacturing will slow through the rest of the year, with a true rebound coming in early 2011.

Nevertheless, scores were above 50 and expanding in a majority of countries, outside of nations such as Greece, Ireland and Spain that are still battling internal debt crises. There were some other notable exceptions, however, such as Japan, with a struggling economy and an October PMI of 47.2, down 2.3 points from September. South Korea was also below 50 for its PMI for the month, meaning economic contraction, being down 2.1 points it indicates accelerating contraction.

In Europe, Germany and the UK both enjoyed accelerated expansion, while France is still showing expansion, but at a basically flat rate (down just .8 for the month).

China and India also had good October numbers, with China rising .9  to a score of PMI 54.7, and India rising 2.1 points to 57.2.

It is important to understand that the scores are relative. For example, China could in any month show decelerating growth even if absolute growth was well above most developed countries (saying going from 9% to 8% growth).  There is a close but not perfect link between PMI scores and a country's GDP changes.

Below is full list of countries in the JP  Morgan index and their October PMI performance.

October 2010 PMI Levels by Country

Source: Wall Street Journal

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(Manufacturing Article - Continued Below)