Global Economic Growth Eases to Near-stagnation in June

July 06, 2012 /

The global economy skirted closer to stagnation at the end of the second quarter. Growth slowed in the service sector and manufacturing production fell back into contraction territory.

The JPMorgan Global All-Industry Output Index – produced by JPMorgan and Markit in association with ISM and IFPSM – slipped to 50.3 in June, down further from February’s 12- month peak of 55.4. All-industry output and new orders both rose only marginally during June, and at the slowest rates since their current periods
of expansion began in August 2009.

Manufacturing output fell slightly for the first time in seven months in June, reflecting lower levels of both total new orders and international trade. Meanwhile, the rate of expansion in service sector business activity eased to near-stagnation.

June PMI data provided further evidence of slowdown in the US economy. Growth of all-industry activity has eased sharply since hitting a 12-month peak in February, with both rates of expansion in both the manufacturing and non-manufacturing sectors downshifting markedly in recent months.

The performance of the Eurozone remained weak, reflecting the ongoing debt and political crises. Contractions in allindustry output were reported by all of the big-four euro area nations (Germany, France, Italy and Spain).

Growth eased in China, the UK and Russia – to three, seven and eight-month lows respectively – while Japan fell back into contraction. Brighter spots were India and Brazil. India saw output growth hit a four-month high, while Brazil expanded solidly following May’s marginal contraction.

Average input prices fell for the first time since July 2009. This was most evident at manufacturers, where the rate of purchase price deflation was the steepest for over three years.

Service providers reported an increase in costs for the thirtyfifth month in a row, but the rate of inflation was the weakest during that period.

June PMI data signalled that staffing levels continued to rise in the global economy, with manufacturers and service, providers both adding to payroll numbers. Job creation was signalled in the US, Germany, the UK, India, Brazil and Russia.

Commenting on the survey, David Hensley, Director of Global Economics Coordination at JPMorgan, said: “The PMIs suggest that the global economy downshifted into neutral gear in June. Output and new order inflows were only marginally above stagnation levels, signalling that global GDP growth over Q2 2012 as a whole will be the most sluggish for around three years.”


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