Markit economic overview Global growth slips to 14-month low at year end

9 January 2015

Markit Economics

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Monthly economic overview

Global economic growth slows for fifth month running to hit 14-month low

The global economy lost further momentum as 2014 came to a close, according to Markit’s worldwide PMI

surveys. The JPMorgan Global PMI™ fell to a 14-month low, signalling GDP annual growth of just less than

2.0%. The developed world continued to outperform emerging markets, but the gulf was the narrowest for

14 months, largely due to developed world growth slowing to the second-weakest for a year-and-a-half.

Global PMI and economic growth Developed v. emerging markets

Sources: Markit, JPMorgan, HSBC

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Monthly economic overview

Ireland and France at opposite ends of

manufacturing rankings

The global manufacturing PMI fell to a 16-month

low in December, though highlighted how very

divergent trends were seen around the world, and

even within Europe. While Ireland stayed at the top

of the rankings for a third successive month, France

fell to bottom place. Eight countries saw

manufacturing conditions deteriorate, four of which

were euro members.

Slower growth meanwhile pushed the US into joint

fourth place alongside Canada, down from the top

spot back in September. The UK, another former

leading-light which led the table earlier in 2014,

sank to twelfth place.

While many emerging markets remained subdued,

Mexico and India bucked the trend, enjoying second

and third place respectively in the manufacturing

rankings.

Sources: Markit, CIPS, NEVI, HSBC, JMMA, BME, Bank Austria, Investec, RBC, ADERCE, ADACI, HPI

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Monthly economic overview

US PMI surveys signal growth slowdown at year-end, but job market remains buoyant

US economic growth (GDP v PMI)* US labour market

Excluding the October 2013 government shutdown, the December US PMI surveys signalled the weakest

expansion since 2012. Growth slowed for a sixth consecutive month. The surveys suggest economic growth

will have slowed in Q4 from the 1.2% (5.0% annualised) rate seen in Q3, down to 0.6% (2.5% annualised) at

best. Job creation remained buoyant, however, with Q4 seeing the biggest hiring surge since the recession.

* pre-crisis PMI uses manufacturing data only.

Sources: Markit, Bureau of Labor Statistics (via Ecowin)

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Monthly economic overview

UK economic growth weakest for 1½ years, but household optimism improves

UK economic growth (GDP v PMI) Inflation and wages

The UK all-sector PMI fell to a 19-month low, rounding off the worst quarter for 1½ years and pointing to GDP

growth of 0.5% in Q4, down from 0.7% in Q3 and adding to the sense that interest rates will remain on hold

until the second half of next year. Household optimism, however, rose to a post-crisis high on the back of

rising incomes and falling inflation. Wage growth exceeded inflation for the first time since 2009.

Sources: Markit, CIPS, ONS (via EcoWin)

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Monthly economic overview

Eurozone close to stagnation in Q4, only Spain sees robust growth among big-4

Eurozone economic growth (GDP v PMI) Eurozone’s big-four member states

The Eurozone PMI picked up only marginally from November’s 16-month low but GDP looks set to rise by a

mere 0.1% in Q4. Of greatest concerns are France and Italy, where the surveys point to GDP falling by 0.1%

in Q4. The survey data have also weakened since earlier in the year in Germany, pointing to just 0.2-3%

GDP growth in Q4, leaving Spain as the only one of the big-four euro states set to enjoy robust Q4 growth.

Sources: Markit, ECB (via EcoWin)

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Monthly economic overview

Japan’s PMI data signal Q4 upturn, but rising import costs hit hiring

Japanese economic growth (GDP v PMI) Japanese employment

Japan looks to have pulled out of the recession induced by last April’s sales tax rise, as the ‘all-sector’ PMI

rose to a three-month high in December. GDP rose 1.4% in Q1, before falling 1.7% and 0.5% in Q2 and Q3

respectively, but an upturn looks likely for Q4. However, the weak yen, down 20% over the past 6 months,

has meanwhile raised import costs and squeezed profit margins, causing firms to hold back on hiring.

Sources: Markit, JMMA, Cabinet Office of Japan (via EcoWin)

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Monthly economic overview

China and India muster modest expansions, downturns seen in Brazil and Russia

India and China both saw ongoing expansions in December, but at lacklustre rates. China’s growth looks set

to weaken from the 7.3% pace seen in Q3, though there is no indication of a ‘hard landing’ for the economy.

Brazil’s woes continue, however, with a renewed downturn signalled in Q4, and the PMI for Russia points to

a further deepening of the country’s downturn, with the rate of contraction in Q4 the steepest since 2009.

Sources: Markit, EcoWin

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Monthly economic overview

Consumer price inflation set to fall further after halving in oil price

Oil prices Inflation rates

Oil prices dropped below $50 per barrel in January, meaning inflation rates are expected to fall even further.

Lower inflation will boost corporate profits (outside of the energy sector) and consumer spending, and allow

policymakers to keep interest rates on hold for longer. But the oil price fall adds to heightened concerns over

deflation in the eurozone, where prices fell compared to a year ago for the first time since 2009.

Sources: EcoWin

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Financial markets

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Monthly economic overview

US dollar hits nine-year high on policy divergences

US dollar strength Euro woes

The US dollar hit a 9-year high on a trade weighted basis on expectations that the Fed will be the first major central bank to raise

interest rates, although the minutes of the latest policy meeting confirmed expectations that no hike was likely before April. The main

losers were the yen and the euro, where policy is moving in the opposite direction. The Japanese authorities announced additional

stimulus measures, and the ECB is coming under pressure to announce more aggressive stimulus – including government bond

purchases (‘full-scale QE’) at its January 22 meeting. The euro dropped to its lowest level against the dollar since 2006.

Source: EcoWin

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Monthly economic overview

Europe and ‘Grexit’ fears lead pull-back in global equity markets

Global equities US outperforms

Equity markets opened 2015 on the back foot, with the FTSE All World index down 2.6% in the first week. Investors are worrying over the

global economic outlook (see chart of equities against the global PMI) and in particular a flare-up of the eurozone crisis ahead of elections

in Greece, which pose the risk of a new government tearing up existing bail-out terms. European bourses are down almost 4%. Shanghai

bucked the trend, up 4.3% on the back of expectations of more government stimulus. US equities continue to outperform, though have

also been volatile so far this year on growth worries.

Source: EcoWin

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