And in the EurozoneThe euro area composite (manufacturing and services) flash index for November was released Thursday morning. The index was 45.8 vs. expectations of 45.7 and October's 45.7. The manufacturing sector was strong, with that component lifting by 0.7 points in November, and the service component was modestly weak, declining 0.3 points. The improvement in the manufacturing component was broad based, as the employment/new orders/production metrics all increased in November. As I pointed out a week ago, the euro area composite index has been about flat since April. Despite the hyperbole, the region's economy is contracting at a very modest pace, and the weakness is no longer accelerating. The November composite index is consistent with quarter-over-quarter real GDP growth of minus-0.2%, in line with the prior few quarters. Not great but not the end of the world either.
Bottom LineThe various purchasing managers' indices in the U.S., Europe and China are indicative of a global economy in which growth has either stabilized or is slightly accelerating. Global real GDP growth in 2012 should be about +3%, and the rate of growth in 2013 should increase very modestly from those levels. Salient conclusions:
- The odds of a U.S. recession are still low (despite the threat of a fiscal cliff).
- The odds of a hard landing in China have materially diminished.
- The rate of contraction in EU economic growth is decelerating.
- Global economic growth will be on the order of +3%, providing a tailwind to earnings growth (my one remaining concern).
- Weak earnings growth will be somewhat countered by global easing, insuring that excess liquidity provides a cushion to downside in risk assets.