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Global economic growth slowed to the lowest since January in
August as the spread of the COVID-19 Delta variant disrupted
activity around the world, led by a renewed downturn in the
emerging markets.
At 52.6, down sharply from 55.8 in July, the JPMorgan Global
PMI™ (compiled by IHS Markit) fell to its lowest since January.
Although remaining at a level consistent with global GDP continuing
to grow at a solid pace in the third quarter after near-record
growth surge in the second quarter, the latest data indicate that
the pace of expansion has now slowed for three successive months to
the weakest since the start of the year.
The slowdown has occurred at a time of rising COVID-19 cases
around the world, attributable to the spread of the more infectious
Delta variant. This has in turn led to a pause in the loosening of
COVID-19 containment measures, on average, and even a re-tightening
of restrictions in some countries.
Although some major economies such as the UK, the eurozone bloc,
India and Brazil scaled back their virus-fighting restrictions in
August, containment measures were tightened in the US, Japan and
China as well as in a number of smaller manufacturing-oriented
Asian economies. The net result was no overall change in global
containment measures after six months of these restrictions having
been continually reduced.
Growth rates weakened for both manufacturing and services during
August, dropping to the lowest since January in the service sector,
led by the first drop in global services exports since March, and
down in manufacturing to the lowest since the sector's recovery
began in July of last year.
Eurozone leads developed markets
Looking at the world's largest developed economies, steep
slowdowns were reported in the US and UK, with rates of expansion
sliding to eight- and six-month lows respectively, albeit with both
economies having notched up historically strong performances during
the second quarter. Both saw manufacturing and service sector
growth rates weaken, with activity stymied by supply and labour
shortages as well as rising COVID-19 case numbers, which often
deterred spending.
The eurozone saw growth moderate far less than in the US and UK,
leaving the eurozone as the best performer of the major developed
economies for a second month in a row. Greater resilience was seen
in terms of service sector growth than in the US and UK, though it
should be noted that the eurozone saw a slower start to its
recovery. Manufacturing also continued to outperform services,
despite widespread problems with the supply of components to many
factories, helping keep the overall pace of eurozone expansion at
one of the fastest for 16 years.
Notably, labour shortages were far less widely reported in the
eurozone than in the US and UK, with US companies even reporting a
decline in headcounts for the first time since the job market
recovery began over a year ago, as a lack of available staff
exacerbated concerns over the Delta variant.
Japan meanwhile saw business activity fall deeper into decline,
with output falling for a fourth month running and at the steepest
rate since August of last year. The service sector was especially
hard hit as the Delta wave disrupted activity.
China leads emerging markets lower
Of the four largest emerging markets, China reported the worst
performance, with output falling back into decline after 15 months
of continual growth. Both the manufacturing and service sectors
contracted, leading to the largest overall drop in Chinese mainland
business activity since March of last year. Falling output was
principally blamed on the resurgence of COVID-19 cases.
Similarly, output fell into decline again in Russia amid rising
virus case numbers, ending a seven-month run of growth. Both
manufacturing and service sectors contracted.
There was better news out of India and Brazil, however, where
activity expanded in both cases after prior Delta-wave related
downturns. In India, the expansion was the first recorded since
April whereas Brazil has now expanded for three successive months,
led in August by the largest service sector expansion since
2012.
Emerging markets see renewed decline
As a result of the downturns in China and, to a lesser extent,
Russia, output across the emerging markets as a whole contracted in
August for the first time since June 2020. Service sector growth
almost stalled and manufacturing output fell for the first time
since May 2020.
The developed world consequently continued to outperform the
emerging markets, though even here the rate of growth deteriorated
for a third month running to slip to the weakest since February.
Slower expansions were recorded in both manufacturing and
services.
Chris Williamson, Chief Business Economist, IHS
Markit
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.
