Taps Coogan – June 29th, 2022

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The following chart, from IIF Chief Economist Robin Brooks, shows manufacturing PMI ‘orders minus inventories’ data for the US and the Eurozone.

The punchline is that the PMI data for orders is looking increasingly soft relative to the data for inventories. Based on the orders-to-inventory trend during prior recessions (GFC, European Sovereign Debt Crisis, and 2020), this suggests that the Eurozone may already be in a recession and that the US is flirting with one.

In the case of the US, the PMI ‘orders’ component remains expansionary. The negative reading in ‘orders minus inventories’ is because growth in the ‘orders’ component is slowing as inventories go from contracting to neutral.

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