The end of the second quarter saw a further slowdown in the rate of global economic growth. Output rose at the weakest pace in five months during June, as growth in both manufacturing production and service sector business activity moderated. The June global all industry output index registered 53.1, down from 53.6 the month before. The average index reading for the second quarter was 53.6, down from 53.9 in the first quarter.
The developed markets continued to perform better than the emerging markets in June. Although the rate of output expansion in the US slipped to a five-month low and remained well below recent highs, it was nonetheless still solid and above the global average. Western European economies also continued to fare well. The UK saw its rate of expansion accelerate for the first time since March, moving the UK up to second position in the global PMI growth league table behind Ireland (where the pace of increase also improved).
The rate of expansion in Eurozone output also solidified, with faster growth Germany, France and Italy. Spain also reported a marked increase in economic activity, albeit the slowest in the year so far. Meanwhile, growth was recorded in the Japanese economy for the third straight month, although the pace of increase remained below the global average. Elsewhere in Asia, growth in China was mild and eased to a 13-month low, while India fell back into contraction following a sequence of expansion that started in May 2014. The manufacturing sectors of Taiwan, South Korea and Indonesia (services PMI data are not collected for these three nations) also saw output fall. Brazil reported a further severe contraction of economic activity in June while Russia saw a marginal drop in output, although the pace of decline was mild compared to the sharp rates seen earlier in the year.
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.