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Five of the eight broad PMI sectors showed signs of recovery
from July
Technology and Consumer Services lag, while Telecommunications
Services sees second downturn
Consumer Services, Telecommunications Services, Industrials and
Financials likely to be hit hardest by further lockdowns
Following the downturn in global business activity driven by
coronavirus disease 2019 (COVID-19), PMI data have pointed to early
signs of economic recovery, with the JPMorgan Global Composite
Output Index posting above 50.0 no-change threshold in each month
of the third quarter. However, underlying PMI data have revealed
diverging trends at the sector level.
The global recovery that began in July was supported by output
expansions in five of the eight broad PMI sectors, namely Basic
Materials, Consumer Goods, Financials, Healthcare and Industrials.
Those upturns followed contractions in each of the previous five
months (except in the case of Healthcare), when widespread COVID-19
lockdowns stifled economic activity. Of these five industries,
average third quarter growth was sharpest in Healthcare and
Consumer Goods, while the expansion for Industrials was only
marginal overall.
Consumer Services sector continues to struggle amid
virus restrictions
Comparatively, the three remaining broad PMI sectors have all
exhibited weak performances in recent months. Firstly, the Consumer
Services sector has continued to struggle amid COVID-19
restrictions. Activity has now fallen in each of the past eight
months and the rate of contraction remained sharp overall during
September. Meanwhile, the Technology sector has lagged the wider
economy in terms of output recovery, returning to expansion
territory only in September. Finally, Telecoms Services had been
the first global sector to record an upturn in activity, but that
recovery soon faded as firms posted further declines in both August
and September.
PMI sub-sector data give further insight into underlying
trends
PMI sub-sector data help to further explain the divergence
between industries in recent months. For example, the latest
improvements in the Consumer Goods and Financials sectors have been
driven by Automobiles & Auto Parts and Banks respectively.
Meanwhile, Healthcare Services continued to support the broader
Healthcare sector, and was the only sub-sector to record average
output growth over the first three quarters of 2020. At the other
end of the spectrum, the Tourism & Recreation sub-sector
continued to weigh on the wider Consumer Services industry which
has experienced sharp declines so far this year. Meanwhile,
sub-sector data suggested that the recent rebound in the Technology
industry was supported by growth at Technology Equipment
manufacturers, which more than offset a fractional decline at
Software & Services firms.
Rising infections rates likely to drive further
disruption
With COVID-19 infection rates in both the US and Europe rising
once again, the imposition of further restrictions looms large.
When lockdown measures were at their most stringent in Western
economies during April, sector PMI data indicated that the economic
impact was most severe in the broad Consumer Services sector.
However, declines were also marked in Telecommunication Services,
Industrials and Financials. Although businesses will have taken
measures to adjust to new working conditions, it is possible that
these sectors could be severely hampered if restrictions were to
retighten. The next release of global PMI sector data on the 5th of
November will give an early insight into how the acceleration in
infection rates has impacted different sectors during October.
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.
