Global economic growth ended 2015 on a softer note, with the rate of expansion in output slowing to a three month low. Furthermore, growth over the final quarter as a whole was (on average) the weakest signaled since the fourth quarter of 2014. The global composite PMI slid to a reading of 52.9, reversing the gains in momentum achieved during the prior two months. The main factor underlying slower output growth was a concurrent moderation in the rate of increase in new orders to an 11-month low.
Although manufacturing production and service sector business activity both continued to rise in December, rates of increase slowed in both cases. Growth at service providers remained faster than that of manufacturers for the twentieth straight month. National PMI data indicated that emerging markets remained the principal drag on global economic growth in December. EM all-industry output fell for the fourth time in the past five months, with declines at manufacturers and service providers alike during the latest survey month.
Downturns occurred in China, Brazil and Russia, in contrast to further growth in India. The pace of contraction in Brazil remained especially steep. Among the major developed markets, all-industry output rose in the US, the euro area, Japan and the UK. However, the Eurozone was the only one to record a faster rate of growth, driven by stronger increases in Germany and Italy. Spain saw a weaker rise in activity while output in France broadly stagnated.
All-industry employment increased again in December, extending the current sequence of job growth to 70 months. The disparity in the output performances of emerging and developed markets was also reflected in the labour markets. Employment rose in the US, the Eurozone, Japan and the UK, but fell in China, Russia. Upward price pressures eased in December. Average output charges rose only marginally, with the pace of inflation below those registered in the prior two months. Input costs, meanwhile, increased at the slowest rate in ten months, mainly due to a further drop in manufacturers' purchase prices.
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.