Continued economic output strength in November for nations including the United States, United Kingdom and Ireland was not enough to counteract increasing struggles on the part of some key European Union members and emerging economies.
The JPMorgan Global All-Industry Output Index, which is produced in conjunction with Markit Economics to analyze manufacturing- and service-sector Purchasing Managers’ Index data, slipped to 53.2 from October’s 53.5. Though the overall index and its six key subcategories (output, new orders, input prices, output charges, employment, backlogs) all remained firmly above the 50 level that separates expansion from contraction, November’s performance marked a seven-month low.
“November saw global economic growth continue its gradual slowdown from the highs of the middle of the year,” said David Hensley, director of global economics coordination at JPMorgan. “The results were again reinforced by slower inflows of incoming new business.” Hensley added that little possibility existed for a fall into contraction territory in December, but that fourth quarter growth would almost surely be “cooler” than previous quarters.
By industry, technology equipment was the top-ranked industry and the biggest one-month gainer, according to Markit. Tourism and travel posted the second-fastest growth. Commercial and professional services, the previous leader, remained in the top five despite an easing pace of growth in November. Construction materials and media were the only industries to report a PMI in contraction territory, though declines in industries tied to automotive production and parts as well as metals and mining put each dangerously close to 50, Markit statistics indicate.
Growth in the US remained strong, but problems in other parts of the world seemed to act as a drag on US production potential more in November than most of 2014. The Markit US Manufacturing PMI declined to 54.8, its lowest point since January, and the Markit US Services Business Activity Index fell to 56.2, the worst growth pace since April. Export orders fell by the most significant pace since June 2013. It is likely no coincidence that manufacturing PMI statistics were especially problematic in the EU—Germany sank below 50 to a 17-month low, France’s contraction accelerated and Italy remained stagnant in negative territory. Additionally, composite PMI readings dropped all of the BRICs (Brazil, Russia, India, China) except India, and the culprit was largely the manufacturing sector.
- Brian Shappell, CBA, CICP