The mood in markets is approaching euphoria thanks to thawing trade tensions and the prospect of central bank easing finally manifesting itself in better real economic outcomes, but the global economy started the fourth quarter on shaky footing.
That’s the message from the JPMorgan IHS Markit global composite PMI which printed 50.8 for October, tied for the second-weakest level in seven years, and the worst read since February of 2016, when the world was still coping with the fallout from the yuan devaluation and crude had plunged into the 20s.
“The global economy made a weak start to the final quarter”, IHS Markit said Wednesday. “The rate of output growth slowed to its joint second-weakest during the current seven-year sequence of expansion”.
It’s the third straight monthly decline on the headline, and the subindexes aren’t great either.
Worryingly, the weakness was especially pronounced in services, suggesting the manufacturing malaise is spilling over on a global scale. “The slowdown in growth was mainly centered on the service sector”, the report reads. “Although services continued to outperform manufacturing, its pace of output expansion was the weakest in over three-and-a-half years”.
While there was a smattering of encouraging color around the factory sector, the truly disconcerting bit is as follows (regarding the employment index, which fell into contraction at 49.8 from 50.3 in September):
Global employment declined for the first time since February 2010. Service sector staffing levels were broadly unchanged over the month, while the pace of job losses at manufacturers was the joint-fastest for over a decade. Employment fell in the US, China, Germany and the UK.
That has the potential to tip dominoes, so to speak.
“One downside of cooling labor markets is the potential hit to consumer spending growth”, Olya Borichevska, VP of global economic research at JPMorgan, remarked. “The outlook therefore remains cautious, with manufacturers and service providers alike hoping that ongoing factors weighing down on growth and demand, such as subdued confidence and global trade tensions, abate further during the coming months”.
Fingers crossed on that. And also on the idea that eventually, the actions taken by the benefactors with the printing presses will resuscitate global manufacturing…