PMIs suggest global growth still set to recover

Preliminary PMIs for May, published on Thursday, suggest that global growth is likely to pick up a bit this quarter, but to remain unspectacular. A weighted average of Markit's preliminary PMIs for the US, China, euro-zone, and Japan was almost unchanged in May, at 51.7. As such it points to world GDP growth of 3-3½% annualised, which is close to its average for recent years, but stronger than it was in Q1.

"We continue to think that the US economy will rebound strongly because the main causes of its slowdown in Q1 should prove to be transient. These are the exceptionally cold winter in the Northeast, the hit to the shale industry from the slump in oil prices, the appreciation of the dollar and some seasonal adjustment problems." said Capital Economics 

Meanwhile, the PMIs for the euro-zone echo the message from other surveys that GDP growth there will slow slightly in Q2 from the 0.4% rate recorded in Q1. The composite PMI edged down although the manufacturing PMI rose, boosted by the weaker euro.

China's economy has slowed this year but it is likely to regain some momentum in the coming months as the authorities have taken monetary and fiscal action to avert a sharper downturn. And finally, growth in Japan is sure to slow in Q2 as its strong performance in Q1 was largely thanks to a one-off surge in inventories.

"Overall, 2015 looks set to be another year of moderate growth, with the US still likely to outperform. Against this backdrop, most central banks will persist with ultra-loose monetary policy, but the Fed should begin raising rates later in the year, perhaps supporting a further appreciation of the dollar. Meanwhile, relatively sluggish growth will make it difficult for indebted euro-zone countries or Japan to grow out of their debts, and is one reason why we think that oil prices are unlikely to pick up from current levels." notes Capital Economics