The global services sector — of enormous economic importance in many developed nations given its contribution to GDP and employment — grew at the slowest pace seen in over three years in the first quarter of 2016.
The JP Morgan-Markit Global Services Business Activity Index (BAI) rose 0.5 points to 51.4 in March, leaving it fractionally above the 40-month low of 50.9 struck in February.
The BAI, like purchasing managers indices (PMI), measure changes in activity levels from one month to the next. Anything above 50 signals growth, while anything below means a contraction in activity — so the higher the better.
Despite the modest improvement registered in March — the first increase registered in four months — the quarterly average slumped to 51.7, marking the weakest expansion in activity levels since the final quarter of 2012.
Mirroring the performance of the headline BAI, the news on the employment front, and demand, was also disappointing.
“March data highlighted a further deceleration in the rate of increase in new business at global service providers. New orders rose at the slowest pace since November 2012. The trend in job creation also moderated, with employment growth running at a five-month low,” said Markit.
The table below, produced by Markit, reveals the internal movements of the survey’s components in March.
Combined with a weak global manufacturing purchasing managers index (PMI) released earlier in the week, the separate JP Morgan-Markit Global All-Industry Output Index — a composite indicator that measures changes in activity levels across both the global manufacturing and services sectors — saw its quarterly average fall to 51.6, indicating activity levels expanded at the slowest pace in over three years last quarter.
Despite the weak quarterly result, the small acceleration in March has David Hensley, director of global economic coordination at JP Morgan, cautiously optimistic.
“The latest PMI surveys provide a mixed picture for the global economy. Survey readings over the opening quarter as a whole was the weakest since the end of 2012, while the trend in new orders remains lackluster overall,” said Hensley. “However, the uptick in the pace of output expansion in March may be an early sign that growth will begin its climb out of the current trough heading into mid-year.”
With forecasts for global growth this year already under pressure, let’s hope the small rise seen in September is indeed the start of something more spectacular.