Tuesday, June 7, 2011

Global Economic Expansion Shows Slight Improvement in May (Chart) "Recovery entering a softer growth phase"


Global All-Industry Output Index by JPMorgan

Official Statement by JPMorgan May  PMI data signal a slight improvement in the rate of expansion of the global private sector economy. The JPMorgan Global All-Industry Output Index posted 52.6, up from April's 21-month low of 51.8. Global output has risen throughout the past 22 months. The underlying trend is still one of slower growth than at the start of the year, as the average index reading so far in Q2 2011 (52.2) is well below that for Q1 (57.3). Manufacturing continued to lead the recovery, despite seeing output growth slip to a near two-year low. Service sector activity rose at a slightly faster pace than in April.
● National data pointed to slower rates of expansion in the US, the Eurozone, the UK and India during May. The cooling in the US mainly reflected a sharp easing in growth of manufacturing output (to a near two-year low) following a sharp slowdown in the nonmanufacturing sector seen during April.
● Rates of expansion gathered pace in both China and Brazil, and held steady at a solid pace in Russia. Although Japan remained in contraction territory, the rate of decline was substantially slower than during the earthquake-affected months of March and April.
● New Orders Index rose from April's 21-month low of 51.4. The rate of expansion was modest and weaker than the average for the current sequence of increase which began in August 2009.
● Employment t rose for the fourteenth month in a row during May, with job creation seen in both the manufacturing and service sectors.
● Input Prices Index n eased for the third month running in May, to its lowest level since last November. Rates moderated in both the manufacturing and service sectors.

Commenting on the Survey David Hensley, Director of Global Economics Coordination at JPMorgan, said: "Growth of the global economy showed a slight improvement in May, although this mainly reflected a slight bounce in the service sector following March's sharp easing. The underlying trend remains consistent with the recovery entering a softer growth phase, especially as manufacturing slowed further. Job creation continued, but sustaining this may be dependent on output and demand firming in the coming months."

Trend The overall increase of global economic expansion has resumed in May 2011 and the short-term trend is upwards. The intermediate-term trend (6 months) reversed to slowing growth in April and the downtrend continues. The long-term trend (12 months) has been downwards since March 2011.

Cycle History The JPMorgan Global All-Industry Output Index reached a Post-Great Recession peak of 59.1 in February 2011. An intermediate term cyclical low of 51.7 was set in November 2009. The All-Industry Output Index is a percentage - not a total. More about the Index below the chart.

Chart (Global All-Industry Output Index) Below is a chart of the of the JPMorgan Global All-Industry Output Index from August 2009 through the latest month reported. The Index has been greater than 50, indicating global output is expanding, since August 2009, for 22 consecutive months. The Index peaked in April 2010 at 57.7, which was a 34-month high. A Post-Great Recession peak was subsequently reached in February 2011.

Commentary Global economic expansion continued in May 2011 and the growth rate increased, after 2 prior months of slowing growth. For May 2011, the various indexes reported:
● USA Manufacturing PMI, expanding at a slower rate
● USA Non-Manufacturing (Services) Index, expanding at a faster rate
● Global Manufacturing PMI, expanding at a slower rate
● Global Non-Manufacturing (Services) Index, expanding at a faster rate
● Global All-Industry Output (Manufacturing + Services), expanding at a faster rate
The overall view is encouraging and better than expected. In addition to the impact of the earthquake in Japan on Global economic expansion, the continuation of high oil prices is of concern as a drag on further economic growth worldwide.

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 83% 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 sources: Country % share of global GDP
United States 28.6
Japan 12.3
China 7.4
Germany 5.0
United Kingdom 4.2
France 3.7
Italy 2.8
Brazil 2.2
India 2.2
South Korea 1.9
Spain 1.8
Australia 1.4
Netherlands 1.1
Russia 1.0
Turkey 0.9
Taiwan 0.8
Switzerland 0.7
Poland 0.6
Hong Kong 0.6
Austria 0.5
South Africa 0.5
Denmark 0.4
Greece 0.4
Israel 0.4
Singapore 0.4
Ireland 0.3
Czech Republic 0.2
New Zealand 0.2
Hungary 0.1

J.P. Morgan Chase & Co. is a leading global financial services firm with assets of $803 billion and operations in more than 50 countries. The firm is a leader in investment banking, financial services for consumers and businesses, financial transaction processing, investment management, private banking and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase is headquartered in New York and serves more than 30 million consumer customers nationwide, and many of the world’s most prominent corporate, institutional and government clients. Information about JPMorgan Chase is available on the internet at http://www.jpmorganchase.com/.

Markit Economics is a specialist compiler of business surveys and economic indices, including the Purchasing Managers’ Index™ (PMI™) series, which is now available for 26 countries and key regions including the Eurozone and BRIC. The PMIs have become the most closely-watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more go to www.markit.com/economics.

Founded in 1915, the Institute for Supply Management™ (ISM) is the largest supply management organization in the world as well as one of the most respected. ISM's mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education. ISM's membership base includes approximately 40,000 supply management professionals with a network of domestic and international affiliated associations. ISM is a not-for-profit institute that provides opportunities for the promotion of the profession and the expansion of professional skills and knowledge.

The International Federation of Purchasing and Supply Management (IFPSM) is the union of 42 national purchasing associations worldwide. Within this circle, about 200,000 purchasing professionals can be reached. IFPSM is a non-political, independent and non-profit oriented international organisation, registered in Aarau, Switzerland. IFPSM facilitates the development and distribution of knowledge to elevate and advance the procurement profession, thus favourably impacting the standard of living of citizens worldwide through improved business practices.

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

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