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Weaker service sector expansion, with falling cross-border
trade, counters further robust manufacturing growth
Upturn led by US, China, India and Brazil, with Europe
stagnating
Growth likely to weaken further in January as COVID-19
restrictions intensify
The pace of global economic growth slowed for a second
successive month in December as further waves of coronavirus
disease 2019 (COVID-19) infections curtailed activity and hit
demand. Optimism about the year ahead also fell amid intensifying
concerns over the spread of the virus, subduing employment growth.
European economies were the hardest hit, but robust - albeit slower
- expansions continued to be recorded in the US, China, India and
Brazil.
Worse may be yet to come, however, as virus-fighting
restrictions look set to tighten further in the coming weeks,
reinforcing expectations of a slow start to 2021 for the global
economy
Global PMI falls for second month running
The JPMorgan Global PMI™ (compiled by IHS Markit with data
collected 4th-21st December) edged down from 53.1 in November to
52.7 in December, its lowest since September.
The decline indicates that the pace of global economic growth
slowed for a second month running, as rising COVID-19 cases
dampened activity and demand, though output is still indicated to
have risen over the fourth quarter as a whole, further recovering
from the unprecedented downturn seen in the first half of 2020.
Consumer services remain hardest hit
Global service sector growth again suffered amid new lockdown
measures in many markets, led by further steep falls in tourism,
recreation and transportation services. Although the service sector
as a whole continued to expand, the rate of increase was the
weakest since September, with inflows of new business rising at the
slowest pace since August.
Manufacturing meanwhile showed encouraging resilience in the
face of rising COVID-19 infections, with global output growth
easing only slightly from the near-decade high seen in November.
The strength of the recent manufacturing expansion led to supply
chain constraints, often linked to shipping shortages, which in
turn limited production in some cases and accounting for at least
some of the slowdown in overall manufacturing growth.
The outperformance of manufacturing relative to services was
further highlighted by the global PMI survey's export indices,
which track cross border flows of goods and services. While global
goods exports rose for a fourth month running, rounding off the
best quarter since the opening months of 2018 (despite some
slowdown due mainly to shipping delays), the service sector saw
exports fall for a seventeenth successive month, with the rate of
decline accelerating to the fastest since July, albeit far less
severe than the downturn seen earlier in 2020. Falling services
exports principally reflected increasingly tight COVID-19
restrictions.
China and US lead overall global expansion
China and the US led the global expansion followed by India,
mainly reflecting above-average service sector expansions in all
three cases, albeit with rates of growth cooling versus
November.
Italy reported the steepest downturn among the world's major
economies, by some margin, amid sharply falling service sector
activity. However, service sector output also fell in all other
big-four euro member states, as well as in Japan, Russia and the
UK.
Manufacturing expansions in the eurozone and the UK meant these
economies remained broadly unchanged overall in December, but Japan
and Russia were notable in remaining in contraction.
Employment hit by renewed virus worries
Business sentiment about prospects for the year ahead fell in
December, principally reflecting rising concerns over further waves
of COVID-19 infections in many countries and the prospect of
tighter restrictions in the near-term. Optimism waned especially
sharply in services, though remained far more buoyant than seen
earlier in the year due to recent encouraging news of vaccine
developments.
The dent to confidence, alongside new COVID-19 restrictions in
some markets, nonetheless took its toll on hiring. Having hit a
one-and-a-half year high in November, global employment growth fell
close to stagnation in December, stalling in manufacturing and
registering only a modest rise in the service sector.
Among the major economies, only the US, China and Brazil
reported any net increases in payroll numbers, and even here the
rates of job creation slowed sharply. The steepest falls were seen
in Russia, the UK, India and the eurozone.
COVID-19 restrictions set to intensify
The slower expansion during December occurred alongside renewed
measures implemented to fight further waves of virus infections in
many countries. IHS Markit's COVID-19 Containment Index* has risen
from 32 in September to 45 in December, though notably remains well
below levels seen earlier in the year (during initial, tighter
lockdowns, this index peaked at 64). The adverse impact on global
GDP from the pandemic in the fourth quarter consequently looks
considerably less severe than seen during the second quarter. Note,
however, that with the PMI data having been collected between
4th-21st December, the latest survey likely failed to capture the
full extent of the month's lockdown measures, which in many
countries were tightened towards the end of the month.
Worse may also be yet to come, as the Global Containment Index
is projected to rise to 46 in January. As such, the recent PMI data
and renewed intensification of the COVID-19 restrictions adds
weight to our forecast that the global economy will see a slow
start to 2021 before the rollout of vaccines allows growth to
accelerate in the second half of the year.
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.
