For all the headline attention on euro zone political heat over the next six weeks or so (Spain is already in the spotlight, Sunday is the first round of the French presidential elections, Greece goes to the polls on May 6, Ireland votes on the EU fiscal pact on May 31 etc etc), global investors may be better rewarded if they follow the more mundane runes of the world’s manufacturing cycle for tips on market direction.
As showcased by the IMF this week, the big picture global growth story remains one of a relatively modest slowdown this year to 3.5% before a substantial rebound in 2013 to well above trend at 4.1%. Of course, there are some who think that’s hopelessly optimistic and others who may quibble about the absolute numbers but agree with the basic ebb and flow.
Yet within even these headline numbers, many mini-cycles are playing out — especially within manfacturing, which accounts for about 20% of global GDP. But problems in deciphering these twists and turns have been compounded over the past year or so by the impact from natural disasters and supply chain disruptions such as Japan’s devastating earthquake and Thailand’s floods.