economic overview - july 2013

7/28/2019 Economic Overview - July 2013

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Monthly economic overview8 July 2013: Global economic growth slows at end of Q2 2013

The Science of Finance


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Global economic growth at near post-crisis low

The pace of global economic growth slowed in June to the second-weakest since the world pulled out of the 2008-09

recession, according to PMI data. The Global PMI fell from 52.9 in May to 51.4, its lowest since July 2009, with the sole

exception of a low seen in June of last year. The developed world saw the weakest growth since last October, while

emerging market growth was the lowest for over four years.

Global PMI and economic growth Developed vs. emerging markets

Monthly economic overview

-5%

-3%

-1%

1%

3%

5%

7%

35

40

45

50

55

60

65

Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12

Global PMI Output Index

Global GDP

JPMorgan Global Composite PMI GDP annual % change

30

35

40

45

50

55

60

65

Jan-06 Jan-08 Jan-10 Jan-12

Development markets

Emerging markets

PMI Output / Business Activity Index


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Developed world PMIs

There were mixed trends among the worlds major developed countries,

with PMIs rising in the UK and eurozone, but falling in the US and Japan.

The UK saw one of the strongest rates of growth since early 2010, with

growth hitting its fastest for just over two years.

In contrast, growth in the US slowed to the weakest since the recovery

began almost four years ago. Growth also dipped in Japan, albeit down

from Mays record and remained historically high.

The recession in the eurozone meanwhile continued, though the rate of

decline was the mildest for 15 months.


UK leads advanced world growth as pace of US expansion hits near four-year low

25

30

35

40

45

50

55

60

65

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

UK

US

Japan

Eurozone

PMI Output Index (manufacturing and services)


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Emerging market PMIs

Signs of weakness persisted in the emerging markets in June, which

collectively signalled the slowest growth since April 2009.

All four BRIC economies saw far weaker growth than earlier in the year,

as a combination of sluggish domestic and export demand hit both

services and manufacturing.

Chinas composite PMI slipped below the 50 no-change level, down to its

lowest since January 2012. In India, on-going near stagnation rounded off

the worst quarter since Q1 2009. Meanwhile, growth also more or less

petered out in Brazil and Russia, the latter being notable in seeing the

slowest pace of expansion for almost three years.


Emerging markets see slowest growth since April 2009

25

30

35

40

45

50

55

60

65


China

Brazil

RussiaIndia



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UK, Japan and North America lead manufacturing ranking, China falls into bottom three

The top of the global manufacturing PMI league table was dominated by developed countries, led by the UK, with Canada,

Japan and the US close behind. The lower end was filled by eurozone and Asian economies. China fell in to the bottom

three of the 25 countries monitored by the surveys, its rate of decline exceeded only by that of Greece and Vietnam. South

Korea and Taiwan also saw modest downturns.


44

46

48

50

52

54

Greece

Vietnam

China

Austria

France

Germany

Netherlands

Italy

Poland

SKorea

Taiwan

Spain

India

Ireland

Brazil

WORLD

CzechRep.

Indonesia

Turkey

Mexico

SouthAfrica

Russia

US

Japan

Canada

UK

June May

Manufacturing PMI


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Global Sector PMIs

The chart on the left ranks sectors by growth of global output in Q2, based

on average PMI readings from the worldwide surveys.

Other financials the non-banking sector have seen the strongest rate

of expansion of business activity in the second quarter by some margin,

contrasting sharply with the near-stagnation seen for banks.

Five of the top six sectors were all service sectors, the exception being

pharmaceuticals & biotechnology.

Metals & mining and general industrials all saw falling output, reflecting

current manufacturing weakness, especially in Asia. The only other sector

to see a drop in production was drink manufacturing.


Non-bank financial sector leads global growth rankings

46 48 50 52 54 56 58

Metals & Mining

Beverages

General Industrials

Banks

Telecommuication Services

Software & Services

Forestry & Paper Products

Media

Household & Personal Use

Healthcare Services

Tourism & Recreation

Automobiles & Parts

Technology Equipment

Machinery & Equipment

FoodTransportation

Chemicals

Construction Materials

Insurance

Commercial & Prof. Services

Pharmaceuticals & Biotech.

Real Estate

Other Financials

Q2 average



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US job creation beats expectations, but economic growth slides to post-crisis low

A tapering of the Feds massive quantitative easing program is looking increasingly likely to start in the next few months

after much better than expected job creation in Q2 (during which payrolls rose 589k). However, it is not all positive news.

The unemployment ratethe Feds main target for policy held steady at 7.6%, and the composite PMI fell to its lowest

level since July 2009, suggesting that the four-year old recovery lost considerable momentum during Q2.

US PMI and economic growth US labour market


-3%

-2%

-1%

0%

1%

2%

25

30

35

40

45

50

55

60

65

70


GDP

PMI

US Composite PMI GDP quarterly % change

-1000

-800

-600

-400

-200

0

200

400

600

4

5

6

7

8

9

10

11


Non-farm payrolls

Unemployment

Unemployment rate Non-farm payrolls monthly change (000s)


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UK economy growth spurt reduces likelihood of further stimulus

The UK PMIs signalled the fastest growth for just over two years in June, reducing the chance of further stimulus by the

Bank of England. The surveys suggest economic growth picked up to at least 0.5% in Q2. New orders and employment

showed the largest gains for almost six years, boding well for the upturn to be sustained into Q3. Strong services growth

was accompanied by manufacturing growth reaching a two-year high and construction also eking out modest growth.

UK PMI and economic growth Bank of England decisions


-3%

-2%

-1%

0%

1%

2%

35

40

45

50

55

60

65


GDP

PMI

Markit/CIPS UK Composite PMI GDP quarterly % change

-150

-125

-100

-75

-50

-25

0

25

50

75

30

35

40

45

50

55

60

65

Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12

BoE monetary policy

PMI

Markit/CIPS UK All-Sector PMI BoE monthly policy change

Quantitative easing


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End of eurozone recession in sight as downturns ease in regions periphery

The Eurozone PMI rose to a 15-month high in June, yet remained below the 50 no-change level to indicate that the

regions recession extended into a record seventh quarter. GDP is likely to have fallen in Q2 at a similar rate to the 0.2%

drop seen in Q1. However, there was encouraging news that the Spanish economy contracted at the slowest rate for two

years, while Italy saw activity fall at the slowest pace since September 2011. Frances downturn likewise moderated.

Eurozone PMI and economic growth Output by country


-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

20

25

30

35

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55

60

65


GDP

PMI

Markit Eurozone Com osite PMI GDP quarterly % change

25

30

35

40

45

50

55

60

65

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Germany

Italy

Spain

France



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Japan sees strongest quarter of growth since 2007, despite slight slowing in June

Despite the composite PMI for Japan dipping from Mays all-time high in June, Q2 saw the highest average PMI reading

since the series began in 2007. The improvement in the index in Q2 is roughly consistent with Japanese GDP rising at an

annualised rate of around 6.0% (1.5% q/q), up from 4.1% (1.0% q/q) in Q1. Japanese firms have seen the strongest

growth of demand for goods and services in the history of the PMI survey in recent months.

Japan PMI and economic growth Output by sector


-6%

-4%

-2%

0%

2%

4%

25

30

35

40

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65


GDP

PMI

Markit Japan Composite PMI GDP quarterly % change

15

20

25

30

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65


Manufacturing

Services

PMI Output / Business Activity Index


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Chinas growth slows further amid steep deterioration in order book indicators

In China, the composite PMI slipped below the no-change level of 50 for the first time since last August. The data suggest

that Chinas GDP growth rate will have slipped further from the already-disappointing 7.7% annual pace seen in Q1. New

orders dropped at one of the fastest rates since March 2009, caused by the joint-steepest fall in manufacturing export orders

for over four years and the weakest increase in demand for services since November 2008.

China PMI and economic growth New orders by sector


0%

2%

4%

6%

8%

10%

12%

14%

16%

40

45

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65


GDP

PMI

HSBC China Composite PMI GDP annual % change

25

30

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65


Manufacturing NewExport Orders Index

Services NewBusiness Index

PMI New Export Orders / New Business Index


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economic overview - july 2013

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