The big 8 vs the small 6

 I wanted to see just how closely smaller economies track the larger ones.  For the larger economies, I created a 'Big 8' GDP-weighted average of their PMIs (Purchasing Manager Indices).  For some of these economies, I don't have 'official' IHS Markit PMIs prior to 2011.  However, I have alternative surveys which track the 'official'  IHS Market aggregates, so I have extended the IHS Markit surveys back, with appropriate adjustment for level (e.g., some series go between 0 and 100, others fluctuate either side of zero).  I have published charts of the Big 8 PMI (as adjusted and extended back) before, most recently here.  These 'Big 8' economies are:  USA, China, Europe, Japan, Brazil, Russia, India, UK.  Together, they comprise 70% of world GDP.

For smaller economies, I  looked for countries where there were survey data back for 25 or 30 years.  In some cases these times series were much more volatile than the PMI series, so I smoothed them using centred 5 or 7 month linear moving averages.  An example of what the results look like is shown below, using Australia, where there has been a long-standing survey run by AIG (Australian Industry Group) and a more recent survey run by IHS Markit.   Although the fit isn't precise, it's good enough.  Note that the AIG survey shows the 7 month centred moving average, not the published data, which are much more volatile month to month.

In some countries (Switzerland, Sweden and Israel) there are no IHS surveys, but there are other similar surveys, with data going back 30 years.  Together, these economies make up 5% of world GDP.

The chart below shows the relationship between the GDP-weighted 'Small 6' (Australia, Canada, Israel, South Africa, Switzerland and Sweden) and the 'Big 8'.  

Because the 'Small 6' time series has not been extreme-adjusted, as each of the individual components of the 'Big-8" have, the Covid Crash appears deeper in these economies than in the 'Big 8" but prolly wasn't, in fact.   I may well extreme adjust the aggregate 'Small 6' index in future, but right now, I'm in the throes of revising my seasonal adjustment and extreme adjustment programs, so I can't until my software changes are completed.

The relationship between the 'Big 8' and the 'Small 6' is closer than I had thought before I started doing this research.  It shows how hard it is for an individual small economy to escape the swings caused by or at least originating in the world's largest economies.  Economic policy in small countries should perhaps focus on improving longer-term trend growth rates as well as improving internal income distribution.  For better or worse, we pretty much have a global business cycle.