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The global economic expansion further accelerated midway into the second quarter, though it remains buoyed primarily by growth within the service sector. Divergence on the prices front persisted even as cost pressures further eased, which continues to call into question the implications for monetary policy and the growth trajectory going forward.

The J.P.Morgan Global PMI Composite Output Index - produced by S&P Global - posted 54.4 in May, up from 54.2 in April. This marked the fourth monthly expansion of the global economy and at the fastest rate since July 2021. The latest reading is broadly consistent with robust annualized quarterly global GDP growth of just over 4.0%.

Both manufacturing and service sector activity expanded at faster rates in May, though maintaining a visible gap between the rates of expansion. Reviving post-pandemic demand kept services output in solid growth territory while manufacturing production rose only modestly. This was underpinned by a divergence in demand with the gap between services and manufacturing at the widest since 2009 in May. Likewise for global trade flows, while export of services saw the largest monthly gain since at least 2014, goods trade continued to decline.

As a result of the demand differentials, the divergence in corresponding price pressures was also marked. Average prices charged for goods leaving the factory gate fell for the first time in three years, contrasting with service sector charges which remained elevated by historical standards. Amid recent surprise hikes by global central banks, whether the unprecedented sectoral divergences will persist will be a question we seek to answer with upcoming releases including the flash PMIs on June 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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