Raoul Pal, founder/CEO of Global Macro Investor Real Vision Group and an economic historian, in a recent tweet, dropped a truth bomb on people. He mentioned how significant countries have their PMI’s below 50, and this can lead to a global recession within months.
But before we head right into the news of the possibility of a worldwide crisis falling upon us, let’s try and understand what PMI stands for.
What is PMI?
PMI or Purchasing Managers Index is a report of the present direction of the economic trends of the manufacturing and service sectors. It gives the decision-makers and investors of a company the information on whether the market conditions viewed by the purchasing manager are staying the same, expanding or contracting.
It is a monthly survey that is spread across 19 different industries which cover upstream and downstream activities. This works as a leading indicator of the overall economic activity in the U.S.
The range for the readings is from 0-100, and anything above 50 is considered suitable for the economy. Anything below 50 can be of concern, and if the score is at 50, then there is no change. In the recent survey, the global rating of PMI was seen, and it was noticed that only 3 countries had their PMI’s above 50- India, Brazil, and the U.S. France showed no change by staying at 50. But our primary concern is how the rest of the countries are going below 50, and this can cause issues at a global level.
There are only three PMI’s in the world that are above 50 – India, Brazil and the US. All three are decelerating too. A reading blow 47 usually signals recession. All PMI’s are falling very fast currently. A global recession is just a few months away. pic.twitter.com/TFzqCGG654— Raoul Pal (@RaoulGMI) July 28, 2019
Even powerful countries like China and Russia are facing problems in maintaining their PMI’s. If these situations prevailed for a longer time, chances of a global recession hitting us would increase with every passing month, and a recession at this level can cause a lot of damage to countries GDP and economic conditions.
What is your take on this situation? Let us know in the comments below.
