During and after the Great Recession, developed economies tended to fare worse than emerging ones, and that was shown in the amount of business going to manufacturers and service companies in various countries around the globe. But in the last few months, that tide has turned. Companies in developed countries are more likely to be reporting growing business than are companies in emerging markets.
The accompanying charts look at trends in the most prominent developing countries — Brazil, Russia, India and China, the so-called BRICS — and four major developed regions, the United States, Britain, the euro zone and Japan.
They are based on the monthly surveys of companies taken by the Institute for Supply Management in the United States and by Markit in many other countries around the world. The surveys ask whether business is improving or getting worse, both over all and in a number of specific areas. The charts focus on the question of whether new orders are increasing or decreasing.
In each case, a figure above 50 shows that more companies are reporting rising orders than are reporting falling orders, and the higher the number, the broader the rising order trend. Similarly, figures below 50 indicate that a plurality of companies sees orders declining. Figures above 60 show widespread growth in orders.
For the first time in more than two years, the four developed regions shown in the graphic all reported rising orders for both manufacturing and service economies in August. There was still growth in some emerging markets, but Indian and Brazilian manufacturers reported falling orders in both July and August. The last period when both of those countries reported declines was March 2009, at the bottom of the worldwide credit crisis.
A simple way to compare the two groups is to average the four reported figures for developed countries and compare it to the average for the four emerging markets, which is done in the bottom chart. The developed-area advantage is the highest it has been since the Great Recession began in the United States in December 2007.
It is worth emphasizing that the figures are intended to show change, not the level of new orders. A company with booming business would presumably report a decline if the boom eased a little, while a struggling company could see a small gain from a low level.
Nonetheless, it is impressive that of the eight euro zone countries where surveys are taken of manufacturing companies, only France registered a figure under the neutral number of 50 in August, and that figure, at 49.8, was the best French manufacturers had posted in more than two years. Even Greece posted a positive figure, that first time that had happened in four years. Germany’s manufacturers, which reported order declines earlier this year, are again reporting increases.
Both the United States and Britain had figures above 60 for new manufacturing orders. That had not happened since the spring of 2010, when order books were still rebounding from the credit crisis. Similarly, the slip in new business has extended to many other emerging markets. While Chinese manufacturers reported a rise in new orders in August, the first such report in four months, the countries registering declines included Taiwan, South Korea, Indonesia and Vietnam. Their manufacturing exports run the gamut, from inexpensive clothes in Vietnam to cars and electronic products in Korea.
Floyd Norris comments on finance and the economy at nytimes.com/economix.
Article source: http://www.nytimes.com/2013/09/07/business/economy/trend-shifts-and-developed-nations-report-business-growth.html?partner=rss&emc=rss