No, the world economy isn't booming ...

 ... even though the manufacturing PMIs are up.

In the chart above, the dotted blue line, representing the big-8 manufacturing PMI, has jumped since the start of the Gulf War, while the services component (dotted red line) has plunged.  At first sight, the jump in manufacturing appears reassuring, but it is misleading.  In commentaries for individual countries, not just the big 8, but others, S&P Global, who calculate these indices, mention that many correspondents have increased stocks (inventories) to try and mitigate the rise in prices they think likely to happen.  In turn, this has led to increased orders and production--remember that everybody's spending is someone else's income.  But when prices have risen, there will no longer be the incentive to build up inventories.  Sales will drop, until inventories are once again in sync with demand and production.  De-stocking will occur, reducing output, sales and employment.

In contrast, services can't be stored in inventories.  You can't 'keep' a haircut or a meal in a restaurant or a holiday or an air trip.  You can't have a stack of services like these in a box in a warehouse.  And because people are directly, right now, feeling the effects of surging oil prices and increased uncertainty, they have cut back.  And until confidence is restored, that will continue.  As the dotted red line shows, services are already in trouble.

But confidence will be very hard to restore.  The US has shown that it does not care about the stability of the world economy or the oil market, and there is no obvious off-ramp for Trump and his haplessly amateur administration.   The oil market is in chaos, and very shortly demand destruction, that is, the reduction in GDP and spending and production to bring oil demand and supply into balance, will begin.  In the short term, oil demand is extremely inelastic, i.e., it is unresponsive to price.  In the longer term, of course, things will happen to shift the relationship between oil demand and GDP, such as switching to EVs for example, or making jet engines and aeroplanes more efficient.   But until those changes take effect, the only way to bring oil demand into balance with oil supply is to contract demand.  The longer the war lasts, the worse the downturn will be.  This is clearest in air transport, where a physical shortage of fuel will constrain the number of flights.  But it applies to road transport as well.  Also, how do people who drive to work by car cut their petrol use?  They can't, so they'll spend less on everything else.  Demand will fall as prices rise.

Economies take time to stop, and time to re-accelerate.  The services PMIs show an immediate response, which will spread into the rest of the economy, soon.

Every previous oil crisis has been followed by recessions.  This one will be no different, unless the war ends now.  And that seems extremely unlikely.

Warning of world recession from PMI/ISM data

When economists first started analysing the business cycle, it was manufacturing* which led the cycle.  The interaction between stocks (inventories), investment, and production meant that this sector of the economy was proportionately more influential on the business cycle than services.  Manufacturing led; services followed.

But services have grown as a percentage of GDP, and even though services don't have an inventory problem (you can't store a haircut or a plane flight), they are in a way more vulnerable to shocks to confidence.  If you fear an impending recession, or a big fall in your income, both of which seem likely as the Iran war drags on, you can cut services immediately.  Don't go out for dinner, don't take a holiday, don't go to shows, have fewer haircuts, and so on.  Of course, you might also postpone buying a car or a house.

What we see in the big 8 (US, UK, Euro zone, China, Japan, Russia, India, Brazil) PMIs shows this split.  Manufacturing is finally recovering from the shock delivered to the system by Trump's tariff stupidities.  Even European manufacturing is now expanding (i.e., in this context, above the 50% "recession line").  Yet, the services PMI has plunged.  And the biggest falls are in the USA and the Euro zone.

If the Iran war is quickly resolved, with irreconcilable differences being papered over for now, it is probable that services could rebound as quickly as they did after Covid.  And a rapid, if short-lived, peace may lead to falling oil prices, which will ensure that Central Banks do not raise interest rates.  But a prolonged conflict will lead to a deep recession and, because inflation will remain high until well into the recession, CBs won't be able to cut rates.  The cut to oil supplies is much bigger than in the 1973 and 1979 oil crises, and those both led to deep recessions and strong inflation surges.

So, whether we get some sort of "peace" or not, is key to whether we enter a deep recession or just a small downward blip.  Trump wants an "off-ramp", of any kind, so my guess is that if Iran agrees to the nuclear deal it agreed to with Obama, and was about to agree to when the US attacked this time, he'll declare a victory and walk away.  But Iran will have demonstrated that it can choke off oil and gas supplies at the drop of a hat.  This is not a recipe for longer-term stability.  So we may see this futile war start and restart over the next while, like embers left over from a bushfire, which means stagflation is horribly likely.

* Actually, in the early 1800s, it was agriculture, because 90% of output and employment was in agriculture.  So what drove the business cycle was the 11-year sunspot cycle.  

Big 8 soggy

The chart below shows the purchasing managers' index (PMI) for the big 8 economies/regions (US, Euro Area, China, Japan, UK, Brazil, Russia, India), which make up just over 50% of the world's GDP.  The blue dotted line is for manufacturing, the red dotted line for services, and the green line is the average of the other two.

The service PMI is improving, but the manufacturing PMI is weakening enough that the average is sliding.

The conclusions are pretty much the same as for the other indicators we've looked at recently: a faltering recovery, though not yet recession, but certainly stagnation.  The US's index is levelling off, the UK's drifting higher, Russia's and China's also fractionally better, Japan's is flat, India's has slowed a lot since July, Europe's is weakening.  So, a mixed result, consistent with stagnation rather than slump.  That may change as new data emerge, and I think the risks lie to the downside. 

Will world interest rates fall further?

This chart shows the GDP-weighted world central bank discount rate (bank rate/Fed Funds rate/central bank lending rate) covering 83% of the world economy, as well as the median of world interest rates that I monitor . The median is the point in a series of data values at which half the observations are above and half below.  It is unweighted.  

The two different kinds of average interest rates usually move in more or less the same direction, though not always.  The GDP-weighted average will be dominated by the largest economies, the median is skewed more towards smaller economies, because they are more numerous.  Note how the median interest rate rose much more than the average before the 2009 GFC, likely making the recession worse; and how the jump in the median rate in 2011-2012 signalled that smaller economies were in trouble, worsening the downturn linked to the euro crisis.

Right now, the median is falling faster than the GDP-weighted average, which is consistent with my "small 15" average PMI index, which has been much weaker than the "big 8" index.  

Will interest rates fall further?  Well, yes, but not by much.  The ECB (European Central Bank) seems happy with its bank rate; the Fed is muttering about not cutting rates again; and the "small 15" PMI is rising fast, meaning smaller economies have become more reluctant to cut rates.  At the same time, world inflation has levelled off after falling from the post-Covid highs.  What is certain is that the low interest rates of the 2009 to 2021 years will not be reached again in this cycle.  Unless the AI-bubble pops .....

Clicking on the chart will make it easier to read.

Global upswing falters

The chart below shows the GDP-weighted average of the "Big 8" whole-economy PMI.  This is a good guide to what's happening in the world economy, as the Big 8 (the USA, UK, China, Japan, Euro Zone, Brazil, India and Russia) make up ~70% of world GDP.  

After strengthening since April last year, the Big 8 PMI dipped in September, for the first time since April.  The recovery which began in April was in response to the levelling off and then the decline in world Central Bank discount rates.  Without Trump's tariff wars and the uncertainty induced by random, rapid policy changes, this recovery would, typically, be strengthening and accelerating.  Instead, it's faltering.

Yes, it's just one month.  It might reverse itself next month.  And yes, China is strengthening, apparently.  But Russia is in deep trouble, Brazil is sliding fast into recession, the UK is down for the second month, and the US is faltering.  An October uptick is entirely possible.  Yet, it is not terribly probable, and is likely to be followed (in my opinion) by another fall.

We have two forces offsetting each other:  the logical and normal upturn (with the usual lag) after interest rates start falling, and the slump caused by Trump's trade wars and resulting heightened uncertainty.  Nothing about the Trump administration heightens confidence; everything suggests to business and consumers that spending delay would be prudent and wise.

I think the fears about the consequences of Trump's policies are winning over the lagged response to interest rates.  And of course, that is self-feeding.  As economies slow, spending falls further, and the economy slows even more.   Remember: everyone's spending is someone else's income.  The traditional way to break that nexus is to cut interest rates and to increase government spending and cut taxes.  Instead, Trump's tariffs have hit the US economy with a swingeing tax increase and big cuts to government spending, i.e., a significant fiscal tightening.  And even if the Fed cuts the Fed Funds rate (and there is no guarantee that it will, as long as inflation is rising), the economy responds with a lag. 

It's very hard to see this ending well. 

Click on the chart to see a bigger and clearer image

As a matter of interest, look what's happening in Brazil.  Brazil's Central Bank raised interest rates. Trump hit them with a 50% tariff, and Argentina (a key trade partner) went into free-fall.  Notice how deep the 2016 downturn was, when America "sneezed" and Brazil "caught a cold" (had a deep recession.)

June Big-8 PMIs tick up; but smaller econs slide

 Big 8 PMIs (US, UK, Euro Area, Japan, China, India, Brazil, Russia -- 70% of the world economy)  ticked up in June.   The averages are still above the 50% "recession line", but not by a lot.  

Europe is key to this:

But smaller economies continue to slide deeper into recession.   The gap between the big 8 and the small 15 (12% of world GDP)  is the biggest in 22 years.

The huge horrible hateful bill may give a short-lived sugar hit to the economy, but then again, it may not.   Billionaires are not known for their high propensities to consume, except perhaps on weddings in Venice, and taxes on ordinary people are going up.  And the backdrop to all this is higher tariffs, which affect the lower paid much more than the rich, plus the shrinking of the agricultural and food labour force, plus the uncertainty about what next Trump will do next.  A US recession still seems likely, but Europe may avoid it.  

Incidentally, Russian stats are in free fall.  Despite their massaging the data.

World economy on brink of recession

This chart shows the Big 8 GDP-weighted PMIs for manufacturing and services.  Just a reminder--the big 8 consists of the US, UK, EA (Euro zone), Japan, China, Russia, India and Brazil, and represents roughly 70% of the world economy.  I have extreme-adjusted each series before I created the global averages.

Some points to note:

1.  The index for manufacturing had started to rise, consistent with the beginnings of a new recovery after the impact of rising interest rates stopped rising in mid-2023, and started falling from Q4 2024.  Since Trump's tariff wars, it has been declining
2. The services index has been falling steadily since December.  Services can quickly respond to uncertainty, for there are no long supply chains, and no inventory.  For example, if you start to worry about the future, you can cancel or postpone your holiday.  That's harder to do with manufacturing.
3. The average of these two, which is a proxy for the whole economy, is drifting lower (though not plummeting) 

The small 15 weighted average PMI, which covers manufacturing only, historically tracks the big 8 quite closely.  However, over the last few months, a big divergence has opened up, as small economies as a whole have slid, though some have done much worse than others.  My small 15 make up 11.5% of the world economy, but there is some overlap with the big 8, since Belgium (0.58%) and Finland (0.18%) are members of the Euro Zone.

Finally, the GDP-weighted PMI for Asia (JP,CH,IN,ID,TW,KR,MY,TH) has plunged.   Together, these countries make up +-28% of world GDP.  Again, this is the PMI for manufacturing only.

The only bright spot:  manufacturing in Europe is picking up.   Will a nascent European recovery be sidelined by the trade war and its associated uncertainty?  Perhaps not, given Europe's economic heft.   And yet, the services PMI is declining.

My judgement is that the world is on the brink of recession. 

China's solar panel manufacturing

This chart shows the level of Chinese solar panel manufacturing in 10,000 kW.  I have interpolated some gaps, particularly with respect to the usual Chinese practice of not publishing data for January and February separately, or at all.  I have seasonally and extreme-adjusted the time series.  These would be solar panels for both local use and exports.

It is plotted on a log scale because of its rapid growth.  It is up 17-fold since 2014, an annual average growth rate of 33% per annum since 2014.  Recently, the growth in output has been accelerating again, which is consistent with the very rapid growth in domestic installations.

Despite all the talk, developed countries didn't really believe in solar, and didn't support it enough.  (Ironically, Australia once led the world in solar, but the government decided to withdraw developmental subsidies, and the Chinese graduate student who'd helped develop solar in this country, returned to China to start theirs.)  

China decided to support the new technologies needed to fight climate change for three reasons.  

First, its coal-led growth had produced terrible, lethal pollution.   You could even see it from space.

Second, they knew climate change was real.  They had no rancid Right, to try and stop the revolution.  And no oil and coal companies to seduce politicians with bribes and poison the public debate with lies.

Third, it saw that these new technologies (wind, solar, lithium-ion batteries, and EVs) were going to be vastly important, and even though they were starting off small, they would grow fast, and would enable China to get rich.  They saw the future and they grabbed it.  

The West kept on believing that growth would be linear, not exponential.  (Many forecasts and projections continue to make this mistake.)   China supported these industries in early years with subsidies and directives.   This forced them down a rapid learning curve.  Cut-throat domestic competition forces the companies in these sectors to past the cost declines on to their customers, which in turn expands the markets.   That's called industrial policy.   It uses the learning curve to carve out new markets.  

End result:  China dominates, and these industries outside China are +-5 years behind, except perhaps for wind.   Chinese EVs, batteries, and solar panels are cheaper than the rest of the world, and only protectionism keeps other domestic markets safe.  

Have developed countries learned their lesson?  You have to wonder.  The US certainly hasn't.  I suspect that this is what Trump is dimly grasping at with his Trump tariffs.  But the Chinese have also made a point of training and educating their work force, and companies spend more than their profits on research to improve the technologies.  BYD is an excellent example.  And they also don't chop and change policies every five minutes.  

Will this kind of industrial policy work in other sectors in China?  Chinese technology firm, DeepSeek, seems to following the same government-driven development path, but for AI.   There was a time when I would have said, but would you trust a Chinese AI?  But would you trust an AI from the USA these days?  And yet, if you're Pakistan or Thailand or Indonesia, do you even care?

If you're a small or a poor economy--in other words, anyone outside the Big 8--it makes sense to buy these products from China.   They're cheap, and will raise your GDP and living standards, while cutting your emissions and your air pollution.  If you're one of the Big 8 economies, you need to spend heavily on promoting production of these technologies to catch up.  Or you might as well give up.  

Meanwhile, the US (the world's largest economy!), has stupidly decided to deal death blows to its own EV, battery and solar industries.  

There are lots of lessons here, but I doubt the West, still in thrall to neo-liberalism, still wedded to the belief that the market always knows best, will learn them.

World economy slipping back into recession

The chart shows the manufacturing PMI and services PMI and their GDP-weighted average for the big 8 economies.  Each time series has been extreme-adjusted before addition.  The big 8 are:  the USA, the Euro zone, China, Japan, the UK, Brazil, India and Russia.  They represent roughly 70% of PPP world GDP. 

The green line, which approximately represents the whole economy (=+- GDP), is still, just, above 50%, the "recession line".  But only just, and it is very likely that it will cross into recession in May or June.  The trade war might affect the US most, but it will also be bad news for other economies.  And its effects are only just starting.

 You can see the global effect hitting small economies, already.  The chart below shows the manufacturing PMI for the big 8 and for the "small 12" (GDP-weighted avg of Switz, Swed, SA, NZ, Israel, Can, Bel, Aust, Fin, Nor, Den, Thai, ) roughly 8% of world PPP GDP.   (Note:  I am in the process of adding Mexico and Malaysia to the small 12 PMI, which will, obviously, take it up to the small 14.  Duh.)

More or less everywhere you look (except Africa as a whole) PMIs are slumping.   The conclusion is obvious.

Big 8 retail sales sluggish

The volume of retail sales (i.e., retail sales after removing the effect of inflation) is a good guide to the level of economic activity.

I only recently started to calculate Big 8 and world retail sales volume, and I have just fixed up the remaining gaps in my data. 

 I was puzzled as to why the Big 8 retail sales, which is a GDP-weighted index, was weakening.  And the answer is China.   I suspect Chinese retail sales will continue to weaken.  Soggy consumer spending is a sign of ppl's concerns about the weakness of the economy and the drag, on confidence and spending, of the property slump and the deflationary forces in the economy.  

Given that the Chinese authorities don't want to reignite the traditional property boom they always used in the past to get growth going again (and, given the demographics, it may in fact be anyway impossible), this slowdown is likely to continue.

The weakness is China is a big negative for world growth, especially since there are not exactly boom conditions elsewhere, while Trump's tariffs will put the kibosh on what growth there is.

Big 8 PMI picking up

Which means that the world economy is picking up.   Manufacturing is strengthening, while services are stable.

No change from my previous judgement that the world economy is lifting out of the doldrums, but the rise is not (for now) going to be rapid.  Trump's tariffs and the likely trade wars complicate the picture, with the US likely to show higher growth and higher inflation, while growth in the rest of the world will be reduced.  

Both manuf and serv PMIs are extreme-adjusted.  The "Total"
(whole economy) is an unweighted average of the two.

A slow world recovery

The chart shows the GDP-weighted averages for manufacturing (blue-dotted line) and services (red-dotted line) PMIs, as well as their average  (green line).   The big 8 are: the US, the Euro zone, China, Japan, India, Russia, Brazil and the UK, and together they make up roughly 70% of world GDP.

It is typical that after a deep recession, economies rebound sharply, but after a "soft landing", where growth doesn't actually go negative, economies take more time to get going.  Look for example at the pattern during the Euro crisis, and compare that to the rebounds after the GFC and the Covid crash.  This seems to the pattern now.

We avoided a deep recession thanks to US deficit spending stimulus with the IRA act, and because of revenge spending on services (experiences like eating out, travel, holidays and shows) after covid lock-ups were ended.   But precisely because we avoided a deep downturn, the economy is unlikely to bounce strongly from its lows.  Eventually, falling interest rates will engender a stronger recovery, but the lags between changes in interest rates and the economy are long.  

So:-  no recession, but for now, a slow recovery.   I expect 2025 to be a year where growth picks up, but not rapidly, as it did in 2013/14.  After that, Trump's tariffs will play havoc with the world economy.

World Econ still above water

I've been distracted by visits interstate to friends and relatives.  And then, cast down by the triumph of vicious stupidity in the US.   So, here (with a bit of a delay) are my GDP-weighted calculations of the services and manufacturing PMIs and their average, which correlates well with GDP.  As usual, the indices for each country were extreme-adjusted before they were combined into the BIG-8 indices.

The BIG-8 is made up of the USA, the Euro Area, the UK, China, India, Russia and Brazil.  Together, they make up roughly 70% of world GDP.

Note that the average of these extreme-adjusted PMIs is still above the "recession line" of 50%, implying that world economic activity is expanding, though, because they're not a lot above 50%, that it's expanding slowly.  Which seems to be born out by my estimates for world GDP, world IP and world retail sales.  Central banks have started cutting interest rates, inflation remains low, but politics could still pour sand into the machinery.  On balance, my guess is that growth will remain sluggish for the next few months, but will pick up thereafter.  

World PMI soggy

 Not a recession.  But certainly very far from runaway growth.   Services holding up, manufacturing sliding, with the average still above the 50% "recession line".

Big 8 = USA, Euro Zone, China, UK, Japan, Russia, Brazil, India, making up 70% of world GDP.  I extreme-adjusted each series before adding them up, weighted by PPP-GDP.

Worrying slide in world PMI in July

 We now have most of the manufacturing PMIs for the world for July.  (Services PMIs out next week).  

There has been a worrying decline in July, almost all of it in the USA, echoed by July's labour force data.  China has also been weak, which I talked about here.  

Economic time series do not always move in straight lines.  For example, in 2013, as the world was recovering from the Euro crisis, there was a 4-month period when the Big 8 manufacturing PMI fell.  At the peak in 2010, the Big 8 PMI apparently peaked in 2010, before going on to achieve an even higher reading in 2011.  So blips in an up or down trend do happen.

What causes recessions is major monetary and credit imbalances.  Slowdowns are different.  Economies don't grow in a straight line.  There are small waves within the big ones.  

So the key question is whether this is just a small wave in the USA, or the start of something much bigger.   

The Fed's tightening has been extreme.  Biden's IRA provided a massive fiscal stimulus, but that is fading (I'll explain how fiscal stimulus works one of these days).  The fiscal stimulus, and the "revenge spending" in services, helped mask the negative effects of the Fed's tightening and the swingeing cuts in liquidity they imposed.  So is the very recent weakening due to the delayed impact of the Fed's tightening of monetary policy?  Because it can't be anything else:  inflation is trending lower; there's no credit crisis; there's no collapse in consumer confidence.  (I will update my US indicators shortly.)

I think the sudden tumble is just a blip.  But I may be wrong; I have been before.  Again, though, I reiterate:  this global economic recovery will not be vigorous.

The Fed will start cutting rates in September.  It may regret not doing it sooner.

World economy picks up

 I often forget that though I have lived through the events depicted in my charts, others haven't.  The chart below shows my calculation of the "Big 8" GDP-weighted PMI, which, coincidentally, covers about half my career in the financial markets.

So, the events: the 2001 recession, the GFC (2008/9), the euro crisis (2012/13), the 2015/16 pause, the 2016-17 Trump tax boom (nothing like deficit spending to give a growth sugar rush), the 18/19 slowdown as fiscal stimulus faded, the 2020 Covid crash, the 2020/21 post-Covid rebound with massive monetary and fiscal stimulus, the inevitable hangover in 2022/23 as fiscal stimulus faded, and interest rates were hiked, and war pushed up inflation, and now, the 2024 recovery.

My guess, after nearly 50 years in economics and the markets?  The recovery will continue.  But it won't be the steep slope of the post-covid recovery, but something shallower.  Which will stop CBs raising rates.  Will they cut rates?  Some will.  Most will --- because inflation is drifting lower and growth won't be fierce enough to push it back up again.  But inflation will be sticky downwards, for reasons I'll discuss in another post.  So the rate cuts won't be very large.

(Data through May 2024; the Big 8 are the USA, China, Japan, Euro area, India, Russia, Brazil, the UK, and they make up +- 70% of the world's economy.)

World economy continues to recover

 S&P Global has released the provisional ("flash") estimates of the PMI indices for May.  The PMI indices are among the earliest data points available for the state of the economy.  The survey asks whether sales, employment, orders, etc are up or down on last month, but not by how much.  S&P Global then produces country indices for manufacturing and non-manufacturing/services.

I take these time series, extreme adjust them, and add them together, each weighted by that country's weight in world GDP (using purchasing power parity, or PPP, exchange rates to value national currency real GDP). 

The Big 5 are: the USA, the UK, the Euro Zone (European countries which use the euro currency), Japan and India.   The big 8 adds China, Brazil, and Russia to this calculation.

The chart below shows the Big 5 and the Big 8 GDP-weighted PMI averages, with manufacturing and service PMIs averaged (= "whole economy").  Since we don't have "flash" PMI estimates for China, Brazil and Russia, Big 8 PMI is only available to April.

Clearly, the world economy is accelerating.  Not only is the Big 5 PMI above the 50% "recession line" indicating that the economy is advancing, but it is also rising, i.e., the economy is accelerating.

The markets' conclusion that interest rates are likely to fall more slowly is correct.  And it is also likely that inflation will fall more slowly, too.

World economic upturn strengthens

 The Big 8 (US, UK, Euro zone, China, Japan, Russia, Brazil, India) average manufacturing PMI rose again in February.  It is till below, just, the 50% "recession line", but its rise is nevertheless clear.  I expect it to cross 50% this month, which will signal the beginning of the global manufacturing business cycle.  (Services are already rising, but we won't have the final services PMIs for another few days)

World economy turns up

 My calculation of the Big 8 PMI for January rose strongly, as foreshadowed by the rise in the Big-5 "flash" PMI. (The Big 8 PMI is a weighted average of the PMIs for the USA, Euro Area, China, Japan, India, Brazil and Russia, and it covers ~70% of the world economy)  

Both services and manufacturing rose.  Their average is above the 50% "recession line", but manufacturing is still below that line, i.e., is still contracting, though more slowly.  The gap between the services and manufacturing PMIs remains unusually large, showing that post-covid "revenge spending" is still a factor.

extreme-adjusted

World economy troughing?

 Business confidence and sales/production surveys are among the first indicators out for the previous month.  This is because they tend to ask simple questions:  do you feel confident about the next 6 months/year?; or, are your sales up or down?  They don't ask how much sales are up or down, which official department of statistics surveys need to know.  They tend to be equally weighted, i.e., all respondents' replies count the same, whereas, say, official surveys of retail sales or industrial production weight the results according to the size of the company.   The PMI (Purchasing Manager Index) surveys typically come out on the first day of the month, or soon after, and are surprisingly good guides to economic activity.  I tend to extreme-adjust the data to remove large spikes, up or down, and in addition, I sometimes smooth the results, particularly for smaller economies. 

The chart below shows the extreme-adjusted PMIs for the "big 8" economies, weighed by GDP.  These are: the USA; the Euro area (countries with the euro as currency); the UK; Japan, Russia, India, China and Brazil.   They make up ~70% of the world economy.  

The green line is the one to watch, as it will be the closest guide to GDP growth, but available months before GDP data are released.  It appears to be turning up.  Of course, things could still go wrong.  For example, the Israel-Palestine war could lead to a surge in the oil price.  But for now, it looks as if the big 8 PMI has bottomed.  Remember that as long as the PMI is below 50%, it implies that the economy is contracting, though if the PMI is below 50%, but rising, it implies that the economy is contracting more slowly. 

However, composition also matters.  The big jump in the services PMI in December comes from just 3 economies: China, India and (particularly) Russia.  China is subject to big month-to-month fluctuations in its PMIs, relative to their underlying trends (so could be reversed next month); India is clearly booming; but Russia's economic data are becoming more and more questionable.  Are companies/CEOs in dictatorships willing to tell depressing truths about sales/employment/production if they fear that anything they say could be used against them?  Still, the "Big 4" average PMI (lower chart) is also showing a rise over the last few months, so even outside these three, PMIs are trending gently upwards.

None of these indicators point to a boom (except in India) but they do suggest that a lower turning point in the economic cycle is imminent.