It is beginning to look as if the baton has been passed on.  In the US there is growing talk Uncle Sam is near the bottom, and beginning the gradual climb upwards – in the UK, the news just gets worse.

The closely watched US Purchasing Managers Index for the Institute of Supply Management rose in May.  At 49.6 the index is still low, but at least it is one point up on the previous month. Anything below 50 suggests manufacturing is contracting.  But ISM says the index usually has to fall to 41.1 before the economy as a whole starts contracting.

Capital Economics said, “It is too early to sound the all-clear, particularly with housing still in freefall and consumer confidence at rock bottom, but it increasingly looks like the worst case scenario of a severe recession has been averted.”

But in the UK, the Purchasing Managers Index produced by the Chartered Institute of Purchasing and Supply fell to 50, the lowest reading since July 2005.

More worrying, the index for tracking output prices rose to 62 . The index has now suffered the most sustained period of output inflation in the series’ history.

Roy Ayliffe, Director of Professional Practice at CIPS, said, “Purchasing managers in the sector continued to face record inflationary pressures, which they tackled by curbing input buying activity and passing soaring fuel, transportation and food costs on to clients.”

What is worrying, both in the UK and US, is that this time around it is the consumer who is in trouble, and yet manufacturing, the sector that should be booming, what with the falling dollar and pound, is suffering too.

But at least it is encouraging that signs have been pointing to a US pick up. The danger though, Stateside, is that low interest rates will lead to surging inflation, which will force the Fed to up rates rapidly, and perhaps send the economy back down again.