Global Economy Sees Weakest Quarter Since 2012
IHS Markit | Jul 06, 2016 08:35
Global economic growth failed to pick up from the sluggish pace seen in May, indicating that the world remains mired in the worst growth phase for three-and-a-half years. Once again, the lack of any growth driver was evident: weak rates of expansion in the US and UK, linked in part to rising political uncertainty, a struggling recovery in the Eurozone and renewed downturn in Japan coincided with an ongoing near-stagnation of the emerging markets.h3 Global economic growth/h3
Developed v emerging markets
Second-weakest expansion in 3½ years
The JPMorgan (NYSE:JPM) Global PMI, compiled by Markit from its worldwide business surveys, held steady at 51.1 in June, rounding off the weakest quarter since the fourth quarter of 2012.
The data point to global GDP (at market prices) rising at an annual rate of just 1.5%, below the long run average of 2.3% and signalling the weakest growth spell since the first half of 2013.
Emerging markets remained in an overall state of stagnation, continuing the trend seen over much of the past year. The emerging market-weighted PMI merely edged up from 49.8 in May to 50.1 in June.
Developed world growth meanwhile slipped to the second-lowest in just over three years, maintaining sluggish growth that has been evident since the down-shifting of gear back in February. The developed world PMI fell from 51.6 in May to 51.5.
The malaise was broad-based, with both manufacturing and services recording only modest growth rates in June. Services remained the stronger-growing sector, albeit by only a small margin, with the pace of expansion much reduced compared to that seen at the start of the year.
h3 Manufacturing v services/h3
Get The App
Eurozone leads developed world
Of the four largest developed world economies, the Eurozone held on to the top spot in the PMI growth rankings, albeit by a slim margin, fueled in particular by faster manufacturing growth. Producers continued to benefit from the weak euro as well as sluggish but ongoing improvements in domestic demand, the latter also helping drive further service sector growth. The surveys are signaling just 0.3% GDP growth, however.
The UK also continued to expand, though much of the June data were collected prior to the country’s referendum vote to leave the EU. Uncertainty regarding the referendum had already been a major factor bringing the PMIs down to a level that signals just 0.2% GDP growth in the second quarter, and the intensification of uncertainty after the vote, including the political upheaval, suggests there is a strong risk of the economy deteriorating in coming months.
Growth also remained disappointingly weak in the US compared to that seen at the turn of the year, with Markit’s flash PMIs suggesting that the US economy continued to grow at an annualised pace of just less than 1% again in the second quarter. This represents the weakest extended period of growth seen in the US since the 2009 financial crisis, with businesses struggling amid weak global demand, the energy sector downturn, the strong dollar and uncertainty caused by the upcoming presidential elections.
Japan remained the worst-performing of the major developed economies – the Nikkei PMI surveys indicate one of the worst periods of growth seen over the past four years. The surveys point to a strong risk that the economy has slipped back into contraction in the second quarter as manufacturing has been hamstrung by the appreciation of the yen and services growth has failed to gain momentum.
h2 Mixed news in emerging markets/h2The overall stagnation signaled across the emerging world masked marked variations by country.
The best news was seen in Russia, where the PMIs signaled the fastest rate of economic growth since February 2013, buoyed by expansion in both manufacturing and services. The improvement in the survey data suggests that Russia is pulling out of the energy-related slowdown and questions widespread expectations of ongoing recession.
There was also better news out of Brazil, where the PMIs signaled an easing in the rate of decline to the slowest since January. That said, Brazil clearly remains the worst performing of the four ‘BRIC’ economies.
The Nikkei PMIs for India picked up signs of faster growth in manufacturing, but also suffered a slowdown in service sector growth, leaving the overall pace of economic expansion stubbornly subdued.
Similarly, in China the Caixin PMI pointed to overall ongoing malaise in June. The bright spot was services, which reported the strongest upturn for 11 months, but that was offset by the steepest fall in manufacturing output since February. While the divergence in the two sectors points to a rebalancing of the economy towards services, the headline rate of growth eased to the weakest in four months and signaled a near-stagnation of overall business activity.
h3 Major developed markets*/h3*uses Flash US PMI for June
h3 Major emerging markets/h3Disclaimer: The intellectual property rights to these data provided herein are owned by or licensed to Markit Economics Limited. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit’s prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon.
In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index™ and PMI™ are either registered trademarks of Markit Economics Limited or licensed to Markit Economics Limited. Markit is a registered trade mark of Markit Group Limited.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.