Yes, the global economy is still slowing down

Tauseef Mustafa/AFP/Getty Images
  • The global economy continued to slow in early 2019, according to the latest JPMorgan-IHS Markit Purchasing Managers Composite Output Index.
  • Output grew at the slowest pace in 28 months. New work, price pressures and employment growth also eased while new export orders fell again.
  • Had it not been for the United States, the result would have been significantly worse.

Output, new work, price pressures and employment growth slowed while new orders from abroad fell for a second month.

That’s the latest sobering report card on the health of the global economy with the JPMorgan-IHS Markit Purchasing Managers Composite Output Index fell to 52.1 points in January, indicating that economic activity continued to slow in early 2019.

The index measures changes in activity levels across the global services and manufacturing sectors from one month to the next, surveying over 18,000 firms from 40 countries that account for an estimated 89% of global gross domestic product (GDP).

A figure above 50 signals that activity levels are improving while a reading below suggests they’re deteriorating, with the distance away from 50 indicating how quickly activity levels expanded or contracted compared to a month earlier.

At 52.1 points, output grew at the slowest pace in 28 months in January.

IHS Markit

Had it not been for continued strength in the United States, IHS Markit said the index would have been even more downbeat.

“National PMI data indicated that the US remained the main driver of global economic expansion,” the group said.

“Output growth slowed to a five-and-a-half-year low in the euro area, as increases in Germany, Spain and Ireland were offset by contractions in France and Italy.

“Rates of expansion slowed in China, Japan, the UK, Brazil, Russia, Australia and Ireland. Only Germany and Spain saw accelerated growth, although rates of increase steadied in both the US and India.”

With output slowing in many parts of the world, employment grew at the weakest pace in 21 months while input prices, having increased sharply earlier in 2018, rose at slowest pace in over two years.

IHS Markit

Hinting that output levels are unlikely to improve in the near-term, new work also grew at slowest pace in two-and-a-half years.

“Growth in manufacturing new orders slumped to near-stagnation, while new work at service providers rose at the weakest pace since September 2016,” IHS Marhit said.

New export orders also contracted for a second consecutive month, driven by weakening demand and continued trade tensions between the United State and China.

Even with sentiment towards global growth in 2019 now lower than just a few months ago, David Hensley, Director of Global Economic Coordination at JPMorgan, says an improvement in new work will be required to those expectations met.

“The trend in new orders will need to pick-up substantially in the coming months if global GDP growth is to recover to a level more in line with expectations for 2019 as a whole,” he said.

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