Global growth at 2-yr low in Jul as developed world contracts: Survey

Growth in the major emerging markets, however, generally remained resilient. Worldwide manufacturing output growth stalled and the recent surge in service sector activity lost significant momentum, IHS Markit, now part of S&P Global, said in a research note. The PMI survey was sponsored by JPMorgan.

Companies blamed tightening financial conditions, heightened uncertainty linked to the Ukraine war, shortages and, most importantly, high inflation for the deteriorating business environment. Optimism about the year ahead likewise fell further in July, prompting a pull-back in global hiring.

Encouragement came from a weakening of global inflationary pressures, with average prices for goods and services rising at the slowest rate for ten months, thanks in part to lower input cost inflation, though also attributable to the recent slowing of demand growth.

The headline PMI, covering output of both manufacturing and services, fell sharply from 53.5 in June to 50.8 in July. The latest reading signals only marginal growth and is the weakest since the recovery from the initial pandemic lockdowns began two years ago.

Barring these lockdown months, the July reading was the joint-second lowest for a decade, the current degree of malaise exceeded only by the near-stagnation seen in February 2016. At its current level, the PMI is indicative of annualised global GDP growth of just 2 per cent.

The worst performance was seen in manufacturing, where a China-led resumption of global growth in June (after two months of decline) faded to register no change in worldwide production volumes.

The most resilient performances in July were again reported in the emerging markets. Growth slowed slightly in mainland China, but remained among the highest seen over the past decade thanks to sustained manufacturing growth and resurgent demand for services as the economy continued to reopen from Omicron-related containment measures.

In the major developed world economies, output fell in the United States for the first time in two years, and likewise slipped into decline in the eurozone.

Excluding pandemic lockdown months, these performances were the worst recorded since 2009 and 2013 respectively, and represent marked turnarounds from the rapid expansions seen earlier in the year following the reopening of economies from COVID-19 containment measures.

The robust growth seen in Japan during June meanwhile gave way to near-stagnation in July, and growth in the United Kingdom sank to a 17-month low.

Manufacturing output contracted in all four largest developed economies in July, with the United States also witnessing a contracting service sector and services growth weakening in all other cases.

The developed world consequently fell into a slight contraction in July, with output falling for the first time in two years and - prior to the pandemic - for the first time since 2012.

Demand growth continued to deteriorate in July. New orders placed for goods fell globally for the first time in two years, registering one of the worst demand downturns seen over the past decade.

Fibre2Fashion News Desk (DS)