Tuesday, January 11, 2011

Global All-Industry Output Index at 8-Month High (Chart) *Global GDP growth accelerates*


Global All-Industry Output Index by JPMorgan

Global All-Industry Output Index Pops +2.6% in December

Official Statement by JPMorgan At 57.1 in December, up from 54.5 in November, the JPMorgan Global All-Industry Output Index rose to its highest level since April and was well above its average for the current 17-month sequence of expansion. For Q4 2010 as a whole, the average rate of growth signalled by the headline index was above that for Q3 and the second-strongest in the past three years
* Activity growth in the service sector outpaced the rate of expansion in manufacturing output for the second month running in December. Services activity rose for the seventeenth consecutive month and at the fastest pace since July 2007. Manufacturing production, meanwhile, also accelerated and rose at the quickest rate for six months.
* National PMI data suggested that the acceleration was largely centred on the US, where growth picked up strongly to its highest since December 2004. Amongst the other major regions covered by the survey, output rose in the Eurozone, China and the UK, but declined for the seventh month running in Japan.
* The rate of growth in the Eurozone steadied at November's three month high. Strong expansions were seen in Germany and France, whereas the recovery in Italy slowed sharply and contractions were signalled in Spain and Ireland. Growth in the UK was only modest, mainly due to a weather-related decline in service sector activity. In contrast, UK manufacturing output rose at the fastest pace since May. The rate of growth in China remained solid, despite easing to three-month low.
* David Hensley, Director of Global Economics Coordination at JPMorgan, said: "December PMI data suggest that global GDP growth accelerated to an annualised rate of around 3.6% q/q. Rates of expansion in output and new orders gathered pace in both the manufacturing and service sectors, adding balance and sustainability to the recovery. The service sector has come to the fore in recent months, a trend which is likely to continue at the start of 2011."

Cycle History The data on the chart below is limited to the latest 17 months ending November 2010. The current Global All-Industry Output Index of 54.6 is down -3.1 and -5.4% from the post-recession peak, and 34 month high, of 57.7 in April 2010. The current Index  is up +2.9 and +5.6% from the intermediate-term bottom of 51.7 in November 2009. Therefore, the current 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 current Global All-Industry Output Index of 57.1 regained the ascending 12-month moving average of 55.1 in December. Since the peak in April 2010 (57.7), there have been 6 decreases in the last 8 months. However, any value over 50 indicates expansion, so the growth had continued at a slower pace and the Index has remained above 50 for 17 consecutive months. (The 12-month moving average chart is not shown on this page).

Chart (Global All-Industry Output Index) Below is a chart of the latest 17 months of the Global All-Industry Output Index from August 2009 through the latest month reported, December 2010. The Index has been greater than 50, indicating global output is expanding, since August 2009, for 17 consecutive months. The Index peaked in April 2010 at 57.7, which was a 34-month high. Five consecutive monthly declines ensued until the October acceleration, November dip, and now a December increase.

Commentary The December increase of the Global All-Industry Output Index (+2.5%) to a strong 57.1 is in line with the December increases of the Global Manufacturing PMI and Global Services PMI. The December acceleration (+1.1%) of the Global Manufacturing PMI is reviewed here. The December acceleration of the Global Services PMI (+2.5%) is reviewed here.  A post-Great Recession  peak was reached in April 2010 (57.7) and the December PMI of 57.1 is just below. However, the Index has remained above 50, which indicates economic expansion, for 17 consecutive months.

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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*Data courtesy of the Institute for Supply Management & JPMorgan*

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