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The pace of global economic growth revived in February having
slumped to a one-and-a-half year low in January, bringing
encouraging news of a muted impact from the COVID-19 Omicron wave.
Although price pressures remained elevated, linked to ongoing
supply constraints and rising energy prices, business optimism rose
to the highest recorded for a decade as firms looked to better
times ahead with the pandemic's disruptions continuing to wane.
However, Russia's invasion of Ukraine has since changed the
economic landscape, posing downside risks to economic growth -
notably in Europe - and driving inflationary pressures higher via
higher energy and other commodity prices, whilst also disrupting
supply chains.
Global PMI and GDP
Global economy revives from Omicron hit
The global economy expanded for a twentieth straight month in
February, according to the JPMorgan Global PMI™ (compiled by IHS
Markit, now part of S&P Global), with the rate of expansion
accelerating from January's 18-month low as the COVID-19 Omicron
wave showed signs of easing. The PMI rose from 51.1 to 53.4, a
level broadly indicative of global GDP growing at an annualized
rate of just over 3% in February after 2% growth was indicated in
January.
Global GDP growth in Q1 2022 so far therefore looks slower at
2.6% than the 3.6% expansion signalled in Q2 2021.
Services lead the rebound
Both manufacturing and services growth improved in February, the
latter recording the steeper acceleration and reflecting the
loosening of pandemic containment measures globally after two
months of tightening.
Global PMI and Covid-19 containment
* IHS Markit's COVID-19 Containment Index is based on a
basket of measures applied by governments to control the spread of
the pandemic, such as non-essential business closures, school
closures and travel and mobility restrictions linked to social
distancing policies. As these measures are tightened, the index
rises towards 100 and a relaxation of measures causes the index to
fall towards zero.
Service providers in fact largely headed the detailed sector
growth rankings in February, led by Other Financials. However,
consumer facing service providers such as Tourism & Recreation
remained subdued amid the ongoing pandemic, albeit returning to
growth after having been hit hard by the Omicron wave in January.
Transportation also remained especially subdued, one of only two
sectors to report falling output (the other being food production).
Ongoing supply chain bottlenecks and labour shortages also
continued to limit growth in many manufacturing sectors, notably
autos and machinery & equipment.
Global PMI output rankings
Developed world growth rates diverge
The UK led the major developed economies, with business activity
growth surging in February as COVID-19 restrictions were almost
entirely withdrawn. Less comprehensive easing of containment
measures in the eurozone and US also led to faster growth after
Omicron related slowdowns in January. While UK growth hit the
highest since last June, with the composite PMI up to 59.9 from
54.2 in January, US growth rebounded to the highest since December
- an output index of 55.9 against 51.1 in January - while the
eurozone saw the fastest growth since last September, with the PMI
recovering from 52.3 in January to 55.5.
In contrast, Japan's PMI fell from 49.9 to 45.8 to indicate the
steepest decline since last August as containment measures were
tightened again.
Output in the largest developed economies
Brazil and India lead emerging markets, as China and
Russia stall
Looking at the major emerging markets, India and Brazil reported
similar rates of expansion with growth accelerating in both cases
to result in composite PMI readings of 53.5. However, while India's
expansion was led by stronger manufacturing, helping to offset
ongoing modest services growth, the reverse was evident in Brazil,
where a fifth monthly decline in manufacturing was offset by
resurgent services growth.
China, pursuing a 'zero-COVID' policy, broadly stagnated for a
second successive month amid increased health restrictions, its
composite PMI holding at 50.1 due to a stagnation of both goods and
services output. Russia, its PMI at 50.8, was also more or less
stalled, as resurgent service sector growth was offset by a renewed
manufacturing decline.
Output in the largest emerging markets
Inflation pressures persist
Supply shortages meanwhile exerted sustained, albeit slightly
reduced, upward pressure on raw material input costs. However,
combined with upward pressure on wages as firms sought to attract
and retain workers and soaring energy bills, the raw material price
increases led for a renewed upturn in global factory selling price
inflation. Prices for goods leaving the factory gate registered the
fourth-largest monthly increase recorded globally since comparable
data were available in 2009.
Prices charged for services meanwhile rose at an unprecedented
rate in the PMI's survey history as rising material, energy and
staff costs were increasingly passed on to customers.
Global input costs and selling prices
New survey highs were consequently seen for selling price
inflation rates in the UK and eurozone, with the US' rate running
at the second highest ever recorded.
PMI prices charged for key economies
In contrast, the PMI selling price inflation rate cooled in
Japan, running at only a very modest level by comparison to those
seen in the US and Europe, and remained subdued in China,
underscoring how supply-constraint-driven inflation remained very
much a phenomenon of the western world in February.
However, measured globally, the overall signal from the PMI was
one of consumer price inflation continuing to run at a very
elevated level in coming months as rising charges for goods and
services are likely to feed through to households. Recent surges in
energy prices suggest further upward price pressures are
likely.
PMI prices charged and global inflation
Outlook brightened to decade-high prior to Ukraine
invasion
As well as tracking the above hard data, the PMI surveys also
asks PMI respondents to report on their expectations for the year
ahead. This forward-looking series showed business optimism at one
of the highest levels recorded since comparable data across
manufacturing and services were first available globally a decade
ago. The survey's index of optimism in the service sector, which
has a longer back history, hit an 11-year high, while sentiment in
manufacturing rose to the highest since last April, rising to a
level rarely exceeded in the survey's history.
Firms across both sectors reported that confidence had improved
primarily as a result of growing hopes of a potential end of
COVID-19 containment measures, in turn buoyed by signs of the
Omicron wave having had only a muted economic impact on both demand
and supply chains.
However, the February monthly PMI data were collected before the
invasion of Ukraine, which is likely to have severely affected
growth expectations while simultaneously pushing price expectations
even higher. March's flash PMI data, published 24th March and
covering business conditions in the US, Eurozone, UK, Japan and
Australia, will reveal the initial impact of the war.
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.
