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Manufacturing reports robust expansion despite supply delays,
services boosted by easing of COVID-19 restrictions
Consumer services show signs of steadying after steep
downturn
US leads upturn, Brazil lags
Global economic growth accelerated to the fastest in just over
six and a half years in March, buoyed by a rejuvenated service
sector accompanying further manufacturing growth. The biggest
change was a near-steadying of activity in the consumer services
sector, which has been hardest-hit by the pandemic, as coronavirus
disease 2019 (COVID-19) restrictions continued to be lifted on
average globally.
The US led the upturn, though output rebounded in Europe and
showed signs of stabilising in Japan. Fortunes were more mixed in
the emerging markets, with Brazil most notably seeing a steepening
downturn in March.
Global growth close to decade highs
At 54.8, up from 53.2 in February, the JPMorgan Global PMI™
(compiled by IHS Markit), hit its highest since August 2014. The
sustained expansion took the recent run of growth into its ninth
straight month, with the rate of growth among the highest recorded
over the past decade.
Manufacturing continued to expand at an impressive pace, with
growth accelerating to one of the fastest seen since 2011 despite
widespread reports that near record supply delays and shortages of
inputs often constrained production and hampered shipments.
However, it was the service sector which saw the biggest monthly
improvement in March, with growth of business activity jumping to
the highest since June 2018.
The faster service sector growth coincided with a further easing
of measures to control further outbreaks of the COVID-19
outbreak.
IHS Markit's Global COVID-19 Containment Index fell from 46 in
February to 40 in March, its lowest since last October, as
restrictions were eased on average around the world for a second
successive month.
Consumer services hardest hit but financial services
boom
Looking deeper into sector trends, by far the biggest change was
seen for consumer services, which have bucked the recovery trend in
recent months, and have contracted continually since the pandemic
began in February of last year. However, March saw the rate of
decline ease markedly to register only a very marginal downturn in
business activity, linked in turn to by far the smallest decline
new in new business inflows into the sector seen since the start of
the pandemic.
However, other service sectors fared well. Financial services
led the overall global economic upturn for the fourth straight
month, with the rate of growth moderating only slightly from
February's all-time high (comparable data are available since
late-2009).
Business to business services also performed well, enjoying the
fastest expansion since June 2018 as corporate spending picked up
and growth increasingly spilled over from the manufacturing upturn
to industrial service providers.
All broad sectors of manufacturing meanwhile reported robust
expansions, led by the investment goods sector to hint at an
encouraging sustained upturn in capital spending. Also noteworthy
was an acceleration in consumer goods production to the
joint-highest since December 2018, fueled in particular by a surge
in demand for consumer goods in the US (in part attributed by many
companies to fresh fiscal stimulus).
The principal area of weakness in the global economy remained
international trade in services, typified by tourism and travel,
which continued to report falling output due to ongoing COVID
restrictions. However, even here the downturn eased markedly to the
weakest since January 2020. Global goods exports meanwhile
accelerated to the highest since the start of 2018.
US leads global expansion
The US continued to lead the global expansion, with growth not
only hitting the highest since August 2014 but also running close
to an all-time US survey record high. The service sector was the
main driver of the US expansion, recording the fastest growth of
all major economies surveyed in March, though manufacturing growth
slowed mainly as a result of supply bottlenecks (new orders for
goods rose at an increased rate).
Growth also rebounded in the Eurozone and UK as businesses
increasingly emerged from lockdowns, most forcefully in
manufacturing, where record eurozone growth was recorded.
Japan's economy meanwhile came close to stabilising, recording
the smallest (only marginal) contraction of business activity since
the pandemic started. An ongoing - though moderating - service
sector downturn countered the strongest manufacturing upturn for
over two years.
Brazil lags with deepening downturn
In the major emerging markets, India recorded the strongest
expansion of business activity for the third successive month,
taking over from China, where growth accelerated but remained
weaker than seen late last year.
Although India's growth remained among the highest seen over the
past decade, output was constrained by rising infection rates
hitting service sector activity. In China the largest constraint
appeared to be shipping shortages for manufacturers, especially in
relation to exports.
Brazil meanwhile saw the worst of both worlds, with
manufacturing hit by supply chain delays and further COVID-19
restrictions, resulting in Brazil being the only major economy to
report a deterioration of factory production in March, which fell
for the first time since last May. Similarly, service sector
activity contracted at a rate not seen since last July amid the
renewed virus wave, leading to an overall drop in activity of a
magnitude not seen since last June.
Although Russia also struggled to sustain manufacturing output
growth, the service sector expanded at the sharpest rate since
October 2019 as COVID restrictions were eased, resulting in the
fastest growth of the economy since last August.
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.
