Summary And Outlook

•  Global leading indicators continued to decline in August, showing further signs of slowing growth in H2. On the upside, both Chinese and US PMIs indicated that the slowdown remains moderate, so we can still look to the manufacturing sector as a growth engine. Additionally, Europe has continued to surprise on the upside, with Germany in particular looking strong. Commodity prices have recovered somewhat but overall still point to a slowdown, as the levels continue to be fairly low. 
  
• We expect a further gradual slowdown of leading indicators in H2 10 and there is an increasing risk that global growth will slip below potential growth towards the end of the year. This points to continued high market volatility and downward pressure on bond yields as declining leading indicators spur fears of a double-dip.
  

Details

• Global PMI new orders fell again in August to 52.5, from 54.0 in July. This was the fourth decline in a row. This still points to growth slightly above trend, but if the PMI continues its decline, the slowdown is moving closer and closer. 
  
• In the US, the ISM rose in August to 56.3, from 55.5. Our ISM model points to a gradual decline over the coming months and we expect it to reach 50-51 by year-end. 
  
• In Euroland, the PMIs indicate that the US and Asian slowdown is beginning to drag down European growth. The ifo confirms that the German rebound is intact but, in spite of the strong growth momentum, some of the more forward-looking indicators send a warning of slowing ahead. Thus, except for the ifo Index, all major forward-looking indicators are pointing downwards. Scandi leading indicators are slightly softer but generally point to decent growth rates. 
  
• Asia is sending mixed growth signals. The Chinese PMI showed some rebound in August, after a visit below 50 in July. Japanese industrial production and the PMI have also stagnated after several quarters of sharp increases. CEE indicators continue to indicate strong growth rates, but some signs of a slowdown are also emerging. Activity in Brazil has stagnated a bit, as the PMI continues to weaken and industrial production continues to decline.