Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Global PMI registers record rise in May but still signals
severe economic downturn
Service sector downturn second-fiercest in 22 years,
manufacturing also still in steep decline
Only China reports output growth in May, though all other major
economies see downturns moderate
Output trends linked to COVID-19 lockdowns, but job market
variances raise doubt over extent to which other countries can
follow China's revival
Global business activity contracted sharply in May, according to
the latest PMI business survey data, dropping for a fourth
successive month. Encouragingly, the rate of decline eased markedly
since April's record decline as economies around world continued to
battle to contain the COVID-19 pandemic, albeit remaining the
second steepest in over two decades.
Global PMI shows record rise in May
The JPMorgan Global PMI™ (compiled by IHS Markit) showed a
record surge of just over 10 index points in May from 26.2 in April
to 36.3, but remained well below the 50.0 no change level to
indicate a fourth successive monthly drop in output across the
combined manufacturing and service sectors.
Despite the rise in the index during May, the latest reading
remained even lower than the prior-pandemic record low of 36.8 seen
at the height of the global financial crisis in February 2009.
The May reading is historically comparable with global GDP
falling at an annual rate of approximately 3% (at market prices),
down dramatically from a contraction rate of almost 7% signalled
back in April.
The latest data were collected between 12th-27th May,
encompassing a time when the vast majority of the countries
surveyed relaxed measures to contain COVID-19 outbreaks to varying
degrees. IHS Markit's COVID-19 Containment Index, based on
information relating to issues such as closures of schools,
non-essential shops and restaurants, as well as restrictions on
public gatherings, internal mobility and external borders, fell
globally from 58 in April to 50 in May. These indices are based on
100 meaning very severe restrictions and zero being no
restrictions.
Service sector leads downturn
The global PMI data showed rates of decline easing in both
manufacturing and services, though the latter continued to suffer
the steeper rate of contraction, linked to its greater exposure to
widespread measures to help prevent healthcare systems from being
overwhelmed by the spread of the coronavirus. Measures have not
only caused temporary business closures but have also led to supply
delays and have hit global demand from both consumers and
businesses for a wide variety of goods and services, hurting
hospitality, travel and tourism and retail sectors especially due
to social distancing policies.
The overall drop in global service sector output was the second
largest in 22 years of data collection, exceeded only by that seen
in April.
Manufacturing output likewise continued to fall steeply, the
rate of decline cooling from April's 11-year high but remaining in
a deeper downturn than at any time since the global financial
crisis. While many companies around the world saw production
restart after lockdown-related closures, many others reported that
demand conditions continued to worsen.
China bucks downturn in May
All major developed and emerging economies contracted at steep
rates with the notable exception of China, where output of the
combined manufacturing and service sectors rose at the fastest rate
since January 2011. The upturn in China was the first expansion
seen since January, thereby providing first signs of recovery since
February's record fall which resulted from the imposed
lockdown.
All other major countries saw downturns moderate in May from
record rates of contraction in April, generally coinciding with an
easing of lockdown measures from peaks in April. The US reported
the mildest downturn, while India reported the steepest
contraction.
Output linked to degree of lockdown
In general, the change in output in May largely reflected the
extent of the coronavirus lockdown measures applied in each
country. Of the largest economies, China saw the least severe
COVID-19 containment measures in May while India saw the
strictest.
Japan appears to have fared badly in terms of the extent to
which output fell in May despite seeing relatively moderate virus
containment measures, but this could reflect Japan's greater
exposure to the recent collapse in global trade and greater
voluntary social distancing than in many other countries.
Will other countries follow China?
The renewed expansion in China is especially interesting as a
potential guide to output in other countries in coming months, as
China relaxed its lockdown measures earlier than other economies
and has now seen both manufacturing and services return to growth.
The former rose for a third successive month in May while the
latter showed an improvement for the first time since January.
Perhaps most encouragingly, inflows of new business in the service
sector rose to an extent not seen since September 2010 as more
businesses opened and social distancing measures were eased.
The rise in the Caixin composite PMI in recent months has
followed changes in China's COVID-19 containment index, and the
planned further easing of restrictions in coming months should
hopefully see the index rise further, as should hopefully be the
case with the global PMI. The global COVID-19 containment index is
expected to ease from 50 in May to 41 in June and reach just 12 by
the end of the year. The equivalent index for China is meanwhile
set to drop from 19 in May to 14 in June and just 5 by the end of
the year. Both scenarios assume no second waves of infections.
A concern, however, is that China's recent growth has been
entirely driven by the domestic market. In contrast, new orders for
exports of goods and services in China both continued to fall at
steep rates in May, which reflected the wider global economic
malaise. Other countries, struggling to recover from virus
lockdowns, will likely see high unemployment act as a dampener on
recoveries. Comparisons of PMI survey employment indices highlight
how China's labour market has not seen anything like the ravaging
that has occurred in countries such as the US, UK and Eurozone,
with only Japan sharing a more muted rate of job losses. These
heightened job losses will inevitably act as a greater brake on
economic recoveries than seen in China.
Chris Williamson, Chief Business Economist, IHS
Markit
Tel: +44 207 260 2329
chris.williamson@ihsmarkit.com
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
