ALL: Global Composite PMI

January 5, 2017 10:00 CST

Actual Previous
Level 53.4 53.3

December global composite PMI edged up to 53.4 from 53.3 in November supported by strengthening inflows of new business and increased levels of employment. The index has signaled expansion throughout the past 51 months. Fourth quarter growth as a whole was (on average) the fastest since quarter three of 2015. However, a lacklustre start to the year meant that therate of expansion over 2016 as a whole was the weakest on an annual basis since 2012.

Manufacturing production accelerated to the fastest for two-and-a-half years. The trend in service sector business activity also remained solid, with the latest rate of growth matching November's 12-month high. National PMI data indicated positive performances for the majority of the nations covered by the global survey. All-industry output rose in the US, the Eurozone, China, Japan, the UK and Russia, with growth accelerating in almost all cases (the exception being a mild slowing in the US). These economies also saw their performance improve during the final quarter of 2016 compared to that achieved in quarter three.

In contrast, downturns in India and Brazil continued in December. Both nations saw concurrent contractions in manufacturing output and services activity, with the faster rates of decrease in both sectors seen in Brazil. Global all-industry new business rose at the quickest pace since July 2015. Faster increases were registered at manufacturers and service providers alike. New order inflows expanded in almost all of the nations covered, the exceptions being Brazil and India.

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.