Growth of global economic activity edged up to a five month high during February, as rates of output expansion accelerated in both the manufacturing and service sectors. Companies also benefited from a solid improvement in new order inflows, as new business rose at the quickest pace since September last year. The February global index reading was 53.9, up from 53.0 the month before. The index has signaled expansion for 29 consecutive months.
Ireland registered the steepest rate of output expansion with growth still hovering close to last August's 14-year high. However, due to their large relative sizes, the US and the UK were the prime drivers of the latest increase in global economic output. The rate of growth in the US surged to a four-month high while the pace of expansion in the UK held steady at an already solid clip, as faster manufacturing growth offset a mild deceleration in services.
There were also signs of a modest growth recovery in the euro area, a region that has often been a drag on the global economy in recent years. Output growth in the Eurozone accelerated for the third month running and to its quickest since July 2014. For the first time since April 2014, expansions in economic activity were signaled in each of the 'big-four' Eurozone economies.
China and India also recorded further growth of all industry output, with rates of increase ticking higher in both cases. Brazil moved into expansion territory, whereas Japan slipped back to stagnation. The Russian economy fell deeper into contraction, with all-industry output declining at the sharpest pace since May 2009. This was mainly due to the weak performance of the service sector, as Russian manufacturers reported a mild increase in output.
JP Morgan Global Composite PMI gives an overview of the global manufacturing and services sectors. It is based on non-opinion based monthly surveys of over 16,00 purchasing executives from 32 of the world's top economies, including the U.S., Japan, Germany, France and China which together account for over 85 percent of global GDP. It reflects changes in global output, employment, new business, backlogs and prices. The Global Composite PMI is seasonally adjusted at the national level to control for varying seasonal patterns in each country and is produced by J.P. Morgan and Markit in association with ISM and the International Federation of Purchasing and supply Management (IFPSM).
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. The J.P. Morgan Global Manufacturing PMI provides advance insight into the global manufacturing and services sectors, which gives investors a better understanding of business conditions and valuable information about the economic backdrop of global markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures. The PMI data are also used by many Central Banks to help make interest rate decisions.
The J.P. Morgan Global Composite PMI data give a detailed look at the manufacturing and services sectors, how busy it is and where things are headed. Since data are pooled from many countries which represent the lion's share of global manufacturing and services output, this indicator provides an advance look at the global private sector economy. Its sub-indexes provide a picture of global output, new orders, prices, employment and backlogs.