Big 3 PMI index ticks up

The (unweighted) average of the PMIs for Japan, Europe and the USA (purchasing managers indices—an excellent early guide to the overall state of economies where IHS Markit does their surveys) ticked up a little in April.  These are the provisional ("flash") estimates based on a partial sample, and are often revised slightly when the full sample is available.   Markit no longer does a "flash" estimate for China, so this chart shows just the average for the US, Europe and Japan which together make up about half the world's economy.

Although it ticked up in April, I don't think it's a sign that the world's economy has stopped slowing.  The sugar hit of the Trump tax cuts is fading, and the Fed has raised interest rates steadily since December 2015.  Even if it's stopped raising rates, the lags between changed monetary policy and the real economy are long—18 months to 30 months.  I could be wrong, of course.  I notice that a lot of investment banks are forecasting a modest recovery.  Since, on the whole, they didn't forecast the slowdown .....

Note that the index is below 50, suggesting that the world economy has gone into recession. The previous flirtation with the 50% line in 2016 turned around when Europe began a recovery which was then put into overdrive by the Trump tax cuts which took effect from January 2018.  US fiscal policy this year will be actually be slightly negative—as higher incomes and spending increases the Federal tax take.  The combined effects of tighter (less loose) fiscal policy and the lagged effects of tighter monetary policy in the US will slow the US economy to a crawl or worse.  The other big economy, Europe, already has a discount rate below zero, and will take too long to move to fiscal stimulus because of tighter rules imposed during the Euro crisis in 2011/12.  But the authorities in China have their feet firmly on the accelerator, and this may be enough to give the world economy a bit of a pick up.  As long as we don't have further trade wars.