Vaccines and PMIs
25 August 2021
Purchasing Manager Index (PMI)
PMIs are good indicators of the current economic perspective and are generally highly correlated with stock market returns.
- PMI is a diffusion indicator that outlines market conditions viewed by purchasing managers. Above 50 it is expanding, below 50 it is contracting compared to the previous month.
- On the first charts, we observe the high correlation between PMI and stock market returns (SPX YoY) for the United States.
State of vaccination
Governments’ measures designed to curb the spread of Covid had significant impacts on businesses worldwide. The vaccination led governments to ease many of those measures and brightened sentiment from purchasing managers.
- There is a clear positive relationship between the average of the last 3 PMIs and the current state of vaccination in a country.
- All countries with most of their population having at least one shot had an average PMI above 50 over the last three months.
Positive sentiment is crucial
Vaccinations provide better health and positive economic sentiment, reflected in PMI, thanks to subsequent governments’ easing of restrictive policies.
- Even if many measures (e.g., job markets, supply shocks) suggest that the economies did not yet recover, positive sentiment is the driving force behind the stock market.
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