The rate of global economic expansion accelerated to a ten month high in January, as growth strengthened in both the The key data in the week ahead are likely to be the flash Purchasing Manager Index (PMI) surveys for May, which are released for the United States (US), Eurozone, Britain, Japan and Australia - Photo by Newsmax

JAKARTA (TheInsiderStories) – The rate of global economic expansion accelerated to a ten month high in January, as growth strengthened in both the manufacturing and service sectors. With new order intakes and business optimism also improving, companies were sufficiently encouraged to raise employment for the third straight month.

Although the trend in international trade flows remained a constraint on economic growth, new export business moved closer to stabilising. The JP Morgan Global Composite Output Index – which is produced by JP Morgan and IHS Markit in association with ISM and IFPSM – rose to 52.2 in January, up from 51.6 in December and reaching its highest reading since March 2019.

It should be noted that the majority of the January PMI survey data were collected before the nCoV outbreak. Due to a later-than-usual release date, the Mexico Manufacturing PMI data were not included in the January Global PMI calculation.

Kazakhstan PMI data for manufacturing and services are now included in the global numbers. Time series data for the global manufacturing, services and composite indices have been updated following the annual review of national weights. Output rose in five out of the six sub-sectors covered by the survey, the only exception being the ongoing downturn at investment goods producers.

Faster growth was signaled at business services, consumer goods and consumer services companies. Intermediate goods production rose following a negligible decrease in December.

The upturn in economic activity also remained broad-based by nation. The United States (US), China, the Euro area, Britain, India, Brazil, and Russia all registered solid expansions. While, Japan and Australia saw modest growth following contractions before the turn of the year. Output contracted in Kazakhstan.

Encouraging signs were also provided by the other PMI sub JP Morgan Global PMI Composite Output Index at ten-month high of 52.2 no change over next 12 months.

Olya Borichevska, from Global Economic Research at JP Morgan, said, “The global economy started 2020 on a stronger footing, with output growth rising for the third straight month to its highest since March of last year suggesting global growth at an-above potential pace.”

She continued, “However, we brace ourselves for a much weaker outcome this quarter as the outbreak of the nCoV virus disrupts activity in China and potentially around the world. Encouragingly, the gains in the PMI were not just confined to the Output Index, with trends in new orders, business sentiment and employment also firming.”

Future Activity Index readings were higher in the Euro area, China, Japan, the UK, India and Australia. The trend in international trade flows also moved to the cusp of stabilization and was less of a constraint on overall growth than in previous months. The improved performance of the global economy during January underpinned further job creation.

Employment rose for the third straight month and at the quickest pace since July 2019. Sector data suggested that stronger jobs growth was largely confined to the service sector, with increases signaled across the business, consumer and financial services sub-industries.

In contrast, manufacturing saw further losses, following cutbacks at both intermediate and investment goods producers. Consumer goods firms raised employment. January saw a mild acceleration in the rate of input cost inflation, which hit a nine-month high.

Stronger increases were seen in both the manufacturing and services sectors. Part of the rise in costs was passed on to clients, leading to a further increase in output charges. That said, the rate of selling price inflation was slightly less marked than in the prior survey month.

The JP Morgan Global Services Business Activity Index rose to 52.7 in January, up from 52.0 in December, its highest level since April 2019. Based on the trend in output, the service sector outperformed its manufacturing counterpart for the twenty second successive month.

The upturn in services activity was broad-based, with 13 out of the 14 nations covered seeing expansions during January. The sole exception was a further downturn in Kazakhstan. The fastest rates of increase were registered in Ireland, India and Germany.

Service sector jobs growth accelerated to a six-month high in January. Employment increased the US, the Euro area, China, Japan, United Kingdom, India, Russia, Australia and Brazil. Services companies benefited from improved intakes of new work and firmer business sentiment.

New orders rose at the fastest pace for six months and to an extent sufficient to test capacity and generate mild growth of backlogs of work. Business optimism rose to its highest in seven months, with confidence improving across the business, consumer and financial services sub-industries.

Edited by Staff Editor, Email: theinsiderstories@gmail.com