Wednesday, November 10, 2010

Global All-Industry Output Index at 6-Month High (Chart) *Accelerates in October*


Global All-Industry Output Index Up +2.2%

Global All-Industry Output Index at 6-Month High: "Solid start for Q4"

Official Statement The JPMorgan Global All-Industry Output Index rose to a four month high of 54.8 in October. Growth of the global private sector economy improved for the first time since hitting a near three year peak in April. The rate of expansion also moved back above the average for the current 15-month sequence of growth. Rates of expansion accelerated for manufacturing production and service sector business activity, reaching four-month highs in both sectors. Manufacturing recorded faster growth than services, continuing the post-recession trend.

"National PMI data signalled that growth was maintained in almost all of the major economic regions covered by the survey. Output rose at accelerated rates in the US (five-month high), China (steepest since April), the UK (fastest since July), Russia (four month high) and India. Growth slowed to an eight-month low in the Eurozone. Japan contracted for the fifth month running, with the recession broadening from services to also encompass manufacturing."

David Hensley, Director of Global Economics Coordination at JPMorgan, said: """The latest PMI data suggest that the global economy made a solid start to the final quarter. Rates of expansion in output and new orders moved higher, breaking their recent decelerating trends. However, it looks as if the recovery is still failing to produce meaningful job creation, which may act as a brake on growth heading into 2011."
Cycle History The data on the chart below is limited to the latest 15 months ending October 2010. The current September Global All-Industry Output Index of 54.8 is down -2.9 and -5% from the post-recession peak of 57.7 in April 2010. The current Index  is up +3.1 and +6% from the intermediate-term bottom of 51.7 in November 2009. Therefore, the current October 2010 Global All-Industry Output Index is approximately mid-range from the recent top and bottom. The All-Industry Output Index is a percentage - not a total. More about the Index below the chart.

Trend The October Global All-Industry Output Index of 54.8 bounced above below the 12-month moving average of 54.5. Since the peak in April 2010, this is the first increase, +2.2%, after 5 consecutive months (May through September) of declines. However, any value over 50 indicates expansion so the growth had continued at a slower pace. The recent downward trend was reversed with this October uptick.

Chart (Global All-Industry Output Index) Below is a chart of the latest 15 months of the Global All-Industry Output Index from August 2009 through the latest month reported, October 2010. The Index has been greater than 50, indicating global output is expanding, since August 2009, for 15 consecutive months. The Index peaked in April 2010 at 57.7. Five consecutive monthly declines ensued until this latest October 2010 acceleration. However, the prior 5 consecutive monthly declines still indicated global output was expanding, just at a slower rate.

Commentary After reviewing the October acceleration in the Global Manufacturing PMI and Global Services PMI in previous posts, this increase and acceleration in the Global All-Industry Output Index comes as no surprise. A post-recession  peak was reached in April 2010, then now 5 consecutive monthly decreases, and now finally an increase. As noted in previous posts and commentary, the global economic indicators have been indicating a slowing of the economic recovery, so this uptick in October is both strong and encouraging.

About The Global Manufacturing & Services PMI (Global All-Industry Output Index) The Global Report on Manufacturing & Services is compiled by Markit based on the results of surveys covering over 11,000 purchasing executives in almost 30 countries. Together these countries account for an estimated 84% of global GDP. Questions are asked about real events and are not opinion based. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease. 50.0 = no change level.

Data sources: Country % share of global GDP
United States 28.8
Japan 12.8
China 6.5
Germany 5.2
United Kingdom 4.3
France 3.8
Italy 2.9
Brazil 2.1
India 2.0
South Korea 1.9
Spain 1.8
Australia 1.3
Netherlands 1.1
Russia 1.1
Turkey 1.0
Taiwan 0.8
Switzerland 0.7
Poland 0.6
Austria 0.6
South Africa 0.5
Denmark 0.4
Greece 0.4
Israel 0.4
Ireland 0.3
Singapore 0.3
Czech Republic 0.2
New Zealand 0.2
Hungary 0.2

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Other Links
Institute for Supply Management (ISM)
JPMorgan Global Manufacturing PMI Press Release (JPMorgan) (pdf download)
*Data courtesy of the Institute for Supply Management and JPMorgan*

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