No OverSpeeding (State of Manufacturing and Global Economic Outlook)

Last year, we have observed strong growth momentum in manufacturing. Many indicators turned the year at their cycle highs. Take Turkish industrial production. The index kept herself at above-trend levels during most of the year (“Resisting The Mean-Reversion”, December 8th, 2017).

For economic variables, stationarity is a key feature. Which basically means “mean-reversion” (around zero). The PMIs announced earlier today fell slightly in line with our expectations. In a similar fashion we have observed consumer confidence pulling back slightly, yesterday. These indicators are called “diffusion-indices”. Which tend to be in stationary form by default. It is not realistic to assume uninterrupted gains in diffusion indices. Today’s levels – well above 50-treshold – indicate the strength of European economic activity. Probably what we have seen and going to see in coming months is nothing but “mean-reversion”. Global Economy appears to fare in healthy fashion.

In coming months we may see Turkish industrial production reverting to her mean, as well.