US July PMI rebounds, but .....

The preliminary ("flash") estimate of the US PMI, calculated by IHS Markit, which is a timely measure of economic activity, increased in July.  The manufacturing PMI increased from 49.8 to 51.3, and the services PMI from 47.9 to 49.6.  A value below 50 indicates a fall from the previous month.

So what about the "but"?  Well that's mostly to do with the continuing exponential growth in new covid infections in the US.   It's hard to be optimistic about an economy in the grip of a deadly pandemic which is growing explosively every day.  On the other hand, it seems that every day brings a new announcement of successes with vaccines or treatments.  Yet it's unlikely that these will become widespread until 2021.  Prudent people, who are able to, will avoid shopping, eating out, and travelling, as my family does.  All that means that recovery will be sluggish until vaccines are widespread.  Remember that the survey doesn't ask "is your business up over 6 months ago?" but "is it up over last month?"  After a big plunge in activity, business can be up on the previous month, however marginally, while still being down compared with 3 or 6 months ago.  Other data, for example, weekly initial unemployment insurance claims, show renewed deterioration. 

For a sustained recovery, we will need one or more reliable vaccines, and a resumption of eating out, shopping, travel; not just in the USA but globally.  We will also need sustained fiscal and monetary support. 

As ever, the extreme-adjusted data remove or reduce sharp "spikes", on the assumption that these will be reversed in subsequent months.  They thus give us a better understanding of underlying trends, though the fluctuations month-to-month are so large that the algorithm is struggling to detect a trend.  But then, we are too.

For what it's worth, I am sure that we are on the road to recovery.  But I'm also sure that the road will be a long one.