Manufacturing activity in the world economy contracted for the fourth straight month in December amid rising borrowing costs and easing but elevated inflation. Production slipped in key economies on slower global demand, new orders fell at the fastest pace in over two years and international trade volumes slumped.

The J.P. Morgan global manufacturing PMI edged down to a 30-month low of 48.6 in December from a 29-month low of 48.8 in November, when it dipped from 49.4 in October. The index fell to 49.8 in September from 50.3 in August, slipping below the neutral mark of 50.0 for the first time since June 2020. Excluding the lows seen during the early stage of the global pandemic, the current PMI reading is the lowest since the first half of 2009.

The four-largest industrial economies mainland China, the US, the Eurozone and Japan -- all saw output and new work contract. Only seven out of the 29 nations for which December data were available had a PMI reading in expansion territory -- India, Russia, Mexico, Colombia, Indonesia, the Philippines and Australia. The US, the UK and Brazil were the largest nations ranking towards the lower reaches of the PMI league table.

Manufacturing jobs declined for the second month in a row but the rate of decline was only slight, as losses in nations such as China, Brazil and the UK were partly offset by gains in the US, the Eurozone and Japan.

"There were also signs that the outlook for production volumes may be stabilizing, as business optimism rose to a four-month high and the cyclically sensitive new orders-to-finished goods inventories ratio edged higher," J.P. Morgan said.

J.P. Morgan Global Manufacturing PMI gives an overview of the global manufacturing sector. It is based on monthly surveys of over 10,000 purchasing executives from 32 of the world’s leading economies, including the U.S., Japan, Germany, France and China which together account for an estimated 89 percent of global manufacturing output. It reflects changes in global output, employment, new orders and prices. The Global Manufacturing 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 Economics 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 sector, 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 generally 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 Manufacturing PMI data give a detailed look at the manufacturing sector including the pace of manufacturing growth and the direction of growth for this sector. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. In addition, its sub-indexes provide a picture of output, employment, new orders and prices.