Boom Doom Economy: Global Economic Expansion Downshifts in June (Chart) "Slowdown broad-based"

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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 Growth of both global output and new business eased in June, following modest accelerations in the previous month. The JPMorgan Global All-Industry Output Index dipped to 52.2, from 52.7 in May, its second-lowest reading since the recovery began in August 2009. The headline index has nonetheless remained above the neutral 50.0 mark, signalling expansion, for almost two years. However, the latest PMI data also provided further evidence that the global economy has downshifted to a slower gear towards the middle of the year. The average output index reading in Q2 was 52.3, down sharply from the post-recession high of 57.3 seen in Q1. June PMI data pointed to modest decelerations in output growth in both the manufacturing and service sectors. The rate of expansion in manufacturing production slowed for the fourth month running to its weakest since June 2009. Service sector business activity growth, meanwhile, eased following a slight acceleration in the previous month. In both sectors, rates of increase during Q2 2011 were well below those reached in the opening quarter of the year.

● National data signalled a broad-based slowdown, with rates of all-industry expansion slowing in the US (22-month low), the Eurozone (20-month low), China (weakest of current 27-month run of growth), India (nine-month low), Brazil (eight-month low) and Russia (seven-month low).

● Growth picked up slightly in the UK, while the rate of contraction continued to ease in Japan. Within the Eurozone, the recovery remained uneven. Solid expansions in Germany and France contrasted with renewed contractions in Italy and Spain.

● New Orders rose at the second-weakest pace since the recovery began in August 2009. Inflows of new work moderated in both the manufacturing and service sectors.

● Employment Job creation was recorded in the global economy for the fifteenth consecutive month in June. The rate of increase in employment was above the average for this period.

● Input Prices June saw further marked inflation of average input prices.

Commenting on the Survey "The PMI data confirm that global GDP growth eased sharply in the second quarter, as the average rate of expansion slipped to a post-recession low after reaching a recovery high in Q1. The slowdown has been broad-based across both manufacturing and services. Job creation has exhibited a higher degree of resilience, however, and this may boost consumer demand when combined with lower inflation."

Trend The short-term trend has reversed to downwards and 3 of the past 4 months. The intermediate-term trend (6 months) continues sharply downwards, after reaching a peak in March 2011. The long-term trend (12 months) continues sharply downwards, after reaching a peak in Febrauary 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 23 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.

Commentary Global economic expansion continued in June 2011 for the 23rd consecutive month. However, the growth rate decreased and has decreased 3 of the past 4 months. For June 2011, the various indexes reported (and are reviewed on this blog):

● USA Manufacturing PMI, expanding at a faster rate

● USA Non-Manufacturing (Services) Index, expanding at a slower rate

● Global Manufacturing PMI, expanding at a slower rate

● Global Non-Manufacturing (Services) Index, expanding at a slower 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.

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 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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