Wednesday, August 3, 2011

Global Economic Expansion Accelerates Slightly in July (Chart) *Services growth offsets manufacturing slowdown*


Global All-Industry Output Index by JPMorgan

Official Statement by JPMorgan The global economy expanded at a slightly quicker pace in July, as faster growth of services business activity offset a weaker increase in manufacturing production. At 52.6, up from 52.3 in June, the JPMorgan Global All-Industry Output Index remained above the 50.0 mark, signalling expansion, for the twenty-fourth consecutive month. Manufacturing production rose at the slowest pace since June 2009 – the opening month of the ongoing recovery in the sector. Although growth in services business activity was the quickest since March, it was still below the average for the current two-year sequence of expansion. Growth in the service sector outpaced that in manufacturing for the first time in five months.

Trend The short-term trend (3-month moving average) has reversed to upwards, as the Index has increased 2 of the past 3 months. The intermediate-term trend (6-month moving average) continues sharply downwards, after reaching a peak in March 2011. The long-term trend (12-month moving average) continues downwards, after reaching a peak in February 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 March 2010 through the latest month reported. The Index has been greater than 50, indicating global output is expanding, since August 2009, for 24 consecutive months. The Index reached a first peak in April 2010 at 57.7%, which was a 34-month high. A Post-Great Recession peak was subsequently reached in February 2011 at 59.1%.

Commentary Global economic expansion continued in July 2011 for the 24th consecutive month plus the growth rate increased. However, the Index has decreased 3 of the past 5 months. For July 2011, the various indexes reported (and are reviewed on this blog and Baidu Planet):
● USA Manufacturing PMI, expanding at a slower rate
● USA Non-Manufacturing (Services) Index, expanding at a slower rate
● China Manufacturing PMI, contracting at a slower 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 slower rate
The overall view is continued expansion, but slowing. In addition to the impact of the earthquake in Japan on Global economic expansion, the continuation of high oil and commodity prices is of concern as a drag on continued economic growth worldwide.

National Data
● The acceleration at the headline level was mainly driven by a marked pick up in growth of the US non-manufacturing sector. This led US output to rise at the strongest pace for four months despite a sharp slowdown in the rate of expansion of manufacturing production to a 25-month low.
● The Eurozone, meanwhile, drifted closer to stagnation. The slowdown was broad-based by nation. Expansion in China continued to cool, while the UK, India, Brazil and Russia all saw faster growth. Japan saw further contraction, but the rate of decline eased - mainly due to the ongoing recovery in manufacturing.

Segment Data
● New Orders July saw a slight decline in manufacturing new orders, while services new business rose at the slowest pace for three months. Subsequently, the overall rate of increase across both sectors slipped to the weakest since the recovery in new orders began in August 2009.
● Employment  The rate of increase was the weakest since last September, reflecting slower job creation at both manufacturers and service providers.
● Outstanding Business fell for the second successive month, with declines seen in both the manufacturing and service sectors. Moreover, the overall rate of contraction accelerated to its fastest since August 2009.
● Input Prices Rates of increase eased in both the manufacturing and service sectors

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
Canada 2.1
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

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

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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