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Global PMI rises for second month running but holds close to
two-year lows
Sentiment about the year ahead and inflows of new work both
lowest for just over two years
Upturn led by emerging market services and US resilience. Trade
acts as further drag
Global business activity grew at a marginally improved pace for
a second successive month in November, albeit continuing to expand
at one of the weakest rates seen over the past two years. Growth is
also likely to soften again in coming months: sentiment about the
year ahead and inflows of new work both deteriorated to the worst
levels recorded for just over two years.
The survey data showed that subdued manufacturing growth and a
further marginal drop in global goods exports acted as a drag on
growth, but the pace of service sector expansion accelerated.
By country, the US led the expansion among the world's largest
economies, though emerging markets closed the gap with the
developed world, the latter held back by slower growth in
Europe.
Growth upturn likely short-lived
In a sign of the global economy showing resilience in the face
of rising concerns over trade wars and escalating geopolitical
uncertainty, the latest business surveys showed worldwide output
rising at an increased rate mid-way through the fourth quarter. The
headline JPMorgan Global Composite PMI, compiled by IHS Markit,
rose for a second successive month in November, edging up from 53.0
in October to a three-month high of 53.2.
However, although the latest reading is indicative of global GDP
expanding at an annual rate of just below 2.5% (at market exchange
rates), the past three months have seen the weakest spell of growth
for two years. Moreover, forward-looking indicators suggest the
improved rate of expansion may prove short-lived. Inflows of new
business grew at the slowest rate since October 2016, while
expectations about output in the year ahead (the only
sentiment-based question in the PMI surveys) hit the lowest since
September 2016.
Backlogs of work - a key indicator of capacity utilisation -
meanwhile registered the second-smallest increase seen over the
past two years, encouraging firms to exercise greater caution in
adding to headcounts. Employment rose globally at the slowest pace
since May of last year as a result.
Boost from emerging market services
Manufacturing output growth improved only marginally from the
28-month low recorded in October, putting the goods-producing
sector on course for its weakest quarter since the second quarter
of 2016. An upturn in emerging market factory output growth to a
three-month high contrasted with a slower pace of expansion in the
developed world, where manufacturing output showed the smallest
rise since June 2016.
In contrast, service sector growth perked up to a four-month
high in November, albeit again led by the emerging markets, which
reported the joint-strongest rise in activity since the start of
2013. Developed world service sector growth meanwhile slipped to
one of the lowest recorded over the past two years.
European slowdown, US resilience
Among the major developed markets, the strongest expansion was
again seen in the US, while Europe saw a further slowdown. Growth
slowed close to stagnation in the UK as Brexit worries intensified,
resulting in the second-worst month for nearly six years. Rising
political and economic worries in the eurozone meanwhile pushed the
rate of expansion in the currency bloc to the lowest for over two
years.
Although US growth edged slight lower, it remained just below
the average seen so far this year, suggesting the strong expansion
has persisted into the fourth quarter. November's PMI numbers
meanwhile indicated that Japan looks set to rebound from a drop in
GDP in the third quarter, with growth holding close to October's
six-month high.
China slowdown contrasts with upturn in other key
emerging markets
In the major emerging markets, the key gains were seen in India
and Brazil, the former notching up the best performance for just
over two years (and one of the strongest gains seen over the past
six years) as growth accelerated in both services and
manufacturing. Brazil meanwhile reported the fastest growth for
nine months, with the PMI hitting its second-highest since 2013 to
add to signs that the economy has regained some growth
momentum.
However, it was Russia that reported the strongest increase in
business activity of the four largest emerging markets, led by the
domestic economy showing more signs of life. The Russian PMI had
sunk to its lowest for over two years in July but has since
revived, albeit losing a little momentum in November.
Growth meanwhile remained subdued in China. Although faster
economic growth was signalled by the Caixin China Composite PMI,
the index failed to regain the ground lost in October, which had
seen the index fall to a 28-month low. As such, the average PMI
reading for the latest two months puts the Chinese economy on
course for the weakest quarterly expansion since the second quarter
of 2016.
Prices rise at slowest rate so far this
year
Tariffs were again a key factor behind a jump in firms' costs,
alongside higher energy prices and rising wages in some countries.
However, the recent drop in oil prices showed signs of feeding
through. Measured across both sectors, input costs showed the
smallest monthly increase since April.
Average selling prices for goods and services also rose at a
reduced rate, cooling further from the survey record high seen in
September, moderating slightly in both manufacturing and services
to show the smallest overall increase so far this year.
Among the major economies for which comparable data are
available, the steepest rise in selling prices was again seen in
Germany, followed by the US, though in both cases rates of increase
eased.
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.
