The global economic recovery continues to lose momentum, according to Markit’s September Worldwide PMI Surveys. The global expansion has slowed down for five months in a row, ans is set to slow further in the final quarter of the year, meaning the probability of the global economy already being in a double-dip recession has risen significantlt – at least for the most vulnerable countries, the report shows.
“Financial market trends reflected the fact that governments are increasingly looking for ways to sustain economic recoveries.”
Markit’s PMI data indicated that global growth continued to cool in September. Global trade flows have dropped well below volumes seen earlier in the year and service sector growth has clearly failed to compensate in most developed economies. Worldwide employment trends meanwhile deteriorated close to stagnation.
“With many economies, especially in the developed world, saddled with persistent high unemployment and export demand weakening, the risks of a further slowdown in coming months have increased, Chris Williamson, director and chief economist at Markit says.
As a result, financial market trends reflected the fact that governments are increasingly looking for ways to sustain economic recoveries.
The report is put together of a series of analysis:
* Worldwide economic growth slows for fifth month running
The global economic recovery continues to lose momentum, according to September’s worldwide PMI™ surveys. What’s more, although the surveys provided some glimmers of hope that the recovery will not completely lose traction, the overwhelming view from the forward-looking data is that the global expansion looks set to slow further in the final quarter of the year, meaning the risk of double-dip recession has risen for the most vulnerable countries.
* Global trade flows grow at weakest rate for over a year
Worldwide export growth hit a 14-month low in September. Asia ex-Japan, which has led the global cycle, points to further slowing in trade flows in coming months, with exports from bellwethers Taiwan and South Korea falling sharply. Signs of some stabilisation are becoming evident, but the downshift in trade volumes since earlier in the year is likely to add to woes in countries tackling budget deficits. UK exports, for example, fell for the first time in over a year.
* Weak labour markets pose increased risks for economic recovery
The recovery continued to be characterised by disappointing job creation, which slowed to near-stagnation in September. Employment has even begun to fall again in some countries, and fell worldwide in the service sector. High unemployment looks set to subdue growth of domestic demand in developed economies in particular. This is a concern given the simultaneous deterioration in the global trade cycle.
* China’s manufacturing sector revives further in September, but faster growth brings surge in price pressures
The HSBC China Manufacturing PMI™, compiled by Markit, rose for the second month running, adding to signs that growth in the world’s second-largest economy is picking up again following a slowdown in the first half of the year. However, the survey also found price pressures to have risen sharply, fuelling worries that the authorities may seek to cool inflationary pressures. State-owned firms reported that selling price inflation had shown the largest jump since the survey began in 2004.
* Emerging market growth loses momentum in Q3
Despite the upturn in the manufacturing PMI for China, the HSBC Emerging Markets Index (EMI), compiled by Markit, showed that the emerging market economic recovery slowed for the second successive quarter. The latest increase in output was the weakest since Q2 2009, when emerging markets recovered from a two-quarter recession, and also fell below the average seen in the three years prior to the financial crisis.
* Euro zone recovery slows as renewed contraction is evident outside of French-German core
The growth trend is less clear cut in the Eurozone. Some resilience is still evident in France and Germany, but an increasing number of peripheral countries (including Greece, Spain and Ireland) appear to be sliding back into recession. Whether the strength of the core nations will be sufficient to sustain growth for the region as a whole remains unclear.
Markit’s Eurozone Retail PMI added to evidence of slower growth, with retail sales falling in the single currency area for second month running in September.
* UK growth slowed sharply in Q3 and outlook darkens
Economic growth slowed sharply in Q3, down to perhaps 0.4%-0.5% compared to the 1.2% surge seen in Q2, according to the PMIs. Signs of a return to payroll- and cost-cutting by private sector companies means even weaker growth is anticipated for Q4. PMI data relating to investment goods orders, for example, suggest that – after a much-lauded initial strong recovery earlier in the year – investment spending growth has already begun to wane.
*Japan’s woes intensify as manufacturing PMI signals renewed contraction
The Bank of Japan announced new stimulus measures as its economy took a further downward lurch in September. The latest PMIs showed the country’s service sector remaining in recession and the Manufacturing PMI showing the first deterioration in business conditions for 15 months. Job losses accelerated as firms grew worried about the outlook.
* PMIs signal looser monetary policy
Calls for renewed economic stimulus in the US and UK are supported by Markit’s PMI survey data, which show business conditions have turned down sharply since the spring. The Markit Eurozone PMI is meanwhile moving closer towards levels which in the past would have triggered a rate cut by the European Central Bank. With inflation below target, the ECB’s insistence that current policy is ‘appropriate’ is starting to look questionable.
Here’s a copy of the full report.
A free chart-based PowerPoint overview of Markit’s latest economic indicators is available for download.