Content provided by Kostya Etus- Research/Portfolio Analyst

In order to evaluate global growth, CLS will be looking at PMI* figures. Overall, the global manufacturing PMI was relatively unchanged in July at a level of 52.5 (ticking down 0.1 but still in expansionary territory). Growth expanded in three-fourths of the world and 61% of PMIs rose on a monthly basis, the most in six months. The U.S. was the global leader in manufacturing growth, followed by three emerging markets: Hungary, Czech Republic, and Taiwan.

But the absolute level of PMI is not the only important thing to review; you must also observe the historical change which will help you gauge the trajectory for growth. Global PMI appears to be flattening out, although still on an upward trajectory. The flattening in global is coming from flattening in the larger developed economies of U.S. and U.K. Some of the other large developed economies such as the Eurozone and Japan are actually showing downward trajectories. But, one of the shining lights is the trajectory of China, which is showing strong momentum coming out of contractionary territory that it exhibited earlier this year. China, arguably the most influential emerging market, saw its PMI climb to its best level in 18 months, thanks to a recent stimulus.

China was not alone, many other Asian counties continued to show improvement in July. Compared to the rest of the world, emerging Asia is one of the best-positioned economies among emerging markets. Export orders were especially strong across the board, suggesting that the economic expansion in much of the developed world is benefiting Asia. Here at CLS, we continue to favor and overweight portfolios with emerging markets, as we see a lot of value and potential for growth in those markets.

*PMI is an acronym that stands for Purchasing Managers’ Index. It is an index published by the Institute of Supply Management (ISM) as an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. A PMI of more than 50 represents expansion of the manufacturing sector compared to the previous month. A reading under 50 represents a contraction, while a reading at 50 indicates no change.

1656-CLS-8/21/2014