The global economy continued to shrink in January but the pace of contraction slackened for the second succeeding month.
The JPMorgan Global All-Industry Output Index, which surveys activity in both services and industry, was at 40.2 in January, above the December reading of 37.3 and above its nadir at 35.5 in November. A reading of below 50 denotes contraction. The index has been below 50 for the past eight months. The global services purchasing managers’ index (PMI), which had improved from 36.1 in November to 39.6 in December, went up further to 43 in January.
The global manufacturing index, which had reached an all-time low of 33.7 in December, improved marginally to 34.9 in January.
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However, the only sub-index of the global PMI indices that continues to hit new lows is the employment index. In the global manufacturing PMI, for example, the employment sub-index was at 36.3 in January, compared with 36.9 in December.
According to JPMorgan, “Staffing levels fell at series record rates in the euro zone (with manufacturing jobs being cut at the fastest rates in their respective survey histories in Germany, France and Italy), China, the UK, Russia, Brazil and Turkey. Japan saw a further substantial drop in staffing levels and, in the US, employment fell at a pace unchanged from December (which was the fastest since early 1991).”
The employment sub-index of the global services PMI, too, fell in January to 38.4 from 38.5 in December.
There could be two ways of interpreting the employment data. One of them is to consider the impact that a contraction in employment will have in further reducing demand, which will pull down growth in future. The other is to consider employment as a lagging indicator, which means an upturn in employment will follow an upturn in demand.
In India, the employment sub-index of the ABN Amro manufacturing PMI was at 47.8 in January, almost the same level as in December.
The data also indicate that countries more reliant on manufacturing will be hit more than those with a large domestic services sector. That could prove to be a silver lining for India.
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Graphics by Paras Jain / Mint