ALL: Global Composite PMI

Wed Jun 03 10:00:00 CDT 2015

Actual Previous
Level 53.6 54.2

May composite PMI signaled a further deceleration in the rate of expansion of global economic output, as modest growth acceleration in manufacturing production was insufficient to fully offset a slowdown in the pace of increase in service sector business activity. Job creation remained strong, as staffing levels rose at the fastest pace since December 2007. The May reading was 53.6, a four month low, and down further from March's recent high of 54.9. The headline index dipped back below its long-run average (53.9), but has nonetheless indicated expansion in each of the past 32 months.

The US, the UK and Spain were the strongest contributors to the latest expansion of global economic output, despite rates of increase easing in all three of these nations. Growth slowed slightly in the euro area, but remained solid compared to that generally seen over the course of the ongoing recovery in the currency union. In addition to Spain, rates of expansion softened in Germany and Italy, but ticked higher in France. The performance of the main Asian economies remained comparatively subdued in May, with China, Japan and India registering only moderate rates of growth. Meanwhile, Russia expanded for the second straight month, but Brazil contracted at the fastest pace for over six years.

The trend in new business was broadly similar to that seen for output in May. The rate of growth in new order inflows also eased to a four-month low that was slightly below its long-run average. Levels of outstanding business were unchanged since April, following increases in each of the prior four months. The trend in employment continued to strengthen in May. The pace of jobs growth was the quickest since the end of 2007, with rates of increase improving at both manufacturers and service providers.

JP Morgan Global Composite PMI gives an overview of the global manufacturing and services sectors. It is based on 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.