Global service sector growth slowed to a crawl in December, pointing to the likelihood that global economic growth decelerated heading into the New Year.
The latest J.P. Morgan-Markit global services PMI gauge slid to 53.1 from 53.9 in November, signalling the slowest monthly expansion in 11 months. The weak reading left the 2015 average at 53.9, slightly below the 54.1 level seen in 2014.
Like all PMI gauges, a reading of 50 is deemed neutral, indicating that activity has neither accelerated nor decelerated during the month. A figure above 50 signals an expansion while anything below signals that activity levels have declined.
A sharp slowdown in the world’s two largest economies – the US and China – were chiefly responsible for the weak reading in December.
Fitting with the decline in the headline index, all of the surveys subindices bar employment weakened during the month with new business and future activity – both forward looking indicators – falling by 1.3 points and 0.4 points respectively.
Here’s the breakdown of the surveys subindices, courtesy of Markit.
David Hensley, director of global economic coordination at J.P. Morgan, suggests weakness in consumer services was largely responsible for the sharp deceleration in activity levels.
The global service sector saw output and new orders both expand at the weakest rates for 11 months in December, with the moderation in new business growth especially sharp. Sector data launched today provide useful insight into the key drivers of the slowdown, which was largely the result of a reversal of fortunes for the consumer services sector. In contrast, the performances of the business services and financial services sectors remained solid in comparison.
In unison with the separate global manufacturing PMI gauge that fell to a fresh three-month low of 50.9 in December, the global composite PMI index – encompassing both manufacturing and services – fell to 52.9 on the back of the new orders gauge hitting a 11-month low.
As a lead indicator on future levels of activity, this suggests that forecasts for an acceleration in global economic growth this year may be already looking shaky.