Financial markets have encountered significant volatility recently due to a cocktail of negative news that includes Standard and Poor?s downgrade of U.S. government debt, the continuing saga of the European sovereign debt crisis and fears of a double-dip recession in the United States. The ?hard? economic data that we have at this point suggest that economic activity continues to expand, at least through July. However, there is some cause for concern in the recent downturn in manufacturing sentiment. ?Soft? economic data in recent weeks underscore the risks not just to the U.S. economic outlook, but the data raise concerns about the prospects for an uninterrupted global economic recovery as well. In this report, we examine the recent deterioration in various purchasing managers? indexes (PMIs) around the world. In an effort to gauge the significance of this geosynchronous deterioration in business sentiment, we look at the relationships between the PMIs and industrial production (IP) and ultimately on real GDP growth.
Summary:
- Business Sentiment Has Weakened Markedly Recently �
- Why Have Sentiment and Production Growth Slowed? �
- Does Sentiment Tell Us Anything Useful About Actual Production? �
- Are We Headed for Global Recession?�
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Source: http://www.fxstreet.com/fundamental/analysis-reports/special-commentary/2011-08-23.html
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