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The global economic expansion decelerated at the start of the second half of 2023 on the back of a deepening manufacturing downturn and cooling of service sector growth. Despite this, selling price inflation ticked higher, hinting at service sector-led stickiness of inflation.

The J.P.Morgan Global PMI Composite Output Index - produced by S&P Global - posted 51.7 in July, down from 52.7 in June. This signalled the slowest rate of expansion recorded since the global economy returned to growth in February. The current reading is broadly consistent with an annualized quarterly global GDP growth of around 2%, which is below the long-run average of 2.9%.

The service sector remained the primary driver of global economic growth at the start of the third quarter, though the pace of expansion eased for a second straight month to the weakest since February. Slowing new business growth in the service sector reflected the easing of the post-pandemic resurgence in demand. Concurrently, rising interest rates have also affected service providers.

Meanwhile, the manufacturing sector remained in contraction, with production levels declining for a second consecutive month in July. The demand dearth persisted with factories reported to still be running down their inventories amid fewer supply chain woes and with general weakness in underlying demand. As a result, prices have fallen in tandem within the goods producing sector.

That said, measured across both goods and services, selling prices rose at a faster rate in the latest July survey. Although forward-looking survey data outlined the likelihood for continued easing of price pressures in the coming months, the current data points to 'stickiness' in inflation which we will be watching with the next round of flash August PMIs from August 23rd.

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Purchasing Managers' Index™ (PMI^®) data are compiled by S&P Global for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

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