The global economic recovery remains 'broad-based and solid'

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Global economic growth remains broad-based and solid in September.

The latest JP Morgan-IHS Markit global composite Purchasing Managers Index (PMI) came in at 54.0 in September, leaving it at the highest level in over two years.

The PMI measures changes in perceived activity levels across the global manufacturing and services sectors from one month to the next. Anything above 50 signals that activity levels are improving while a reading below suggests they’re deteriorating.

The distance away from 50 indicates how quickly activity levels are expanding or contracting.

So activity levels improved at a decent clip in September, continuing the positive momentum seen in recent months.

According to IHS Markit, the global composite PMI averaged 53.8 in the September quarter, marking the fastest quarterly improvement in three years.

Source: IHS Markit

Making that statistic all the more impressive, IHS Markit said that the improvement was broad-based in nature, an outcome in stark contrast to recent years where a strong headline result masked a widely divergent performances across individual nations.

“Economic activity rose across all of the nations for which all-industry data for September were available,” IHS Markit said.

“Rates of expansion improved in the euro area, the UK and Russia, while Brazil returned to growth after contractions in the prior three months.

“Output increased at slower rates in the US, Japan and Australia.”

Like the broad strength across individual nations, IHS Markit said that all six activity subindices all improved from a month earlier.

This table from IHS Markit shows how each individual activity subindex fared in September.

Source: IHS Markit

Input and output prices both grew at a faster rate — indicating that inflationary pressures built during the month — while order backlogs also increased at a slightly faster pace.

“Price pressures strengthened in September,” said IHS Markit.

“The rate of increase in input costs rose to an eight-month high, mainly reflecting a solid acceleration in purchase price inflation at manufacturers.

“Output charges rose at one of the quickest rates since selling price data were first compiled eight years ago, beaten only by that recorded in February 2011.”

Elsewhere new orders and employment grew at a slightly slower pace than August.

Despite the moderation in the employment subindex, staffing levels have now increased for 91 months straight, nearly eight years.

“Although the rate of increase eased to its weakest since June, it remained among the best witnessed over the past decade,” IHS Markit said.

With activity levels expanding strongly across the globe, David Hensley, director of global economic coordination at JP Morgan, said that the September report bodes well for the final quarter of the year.

“The global PMI suggests that underlying global growth is strong and steady, with recent performance the best in three years,” he said.

“This is providing a real spur to the labor market with job creation in recent months being among the best seen over the past decade.

“As output growth remains broad-based by sector, new order inflows solid and backlogs of work rising, the world economy looks primed to continue this solid upturn during the final quarter of the year.”

The JP Morgan-IHS Markit global composite PMI surveys 18,000 firms every month in over 40 countries. Combined, these countries account for an estimated 89% of global gross domestic product (GDP) output.

It’s worthwhile listening to, in other words, and the news for the global economy over the September quarter was undoubtedly good.

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