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Global growth decelerates amid manufacturing downturn

The global economic expansion slowed in September as manufacturing output declined for the first time this year. Forward-looking indicators meanwhile hint at further deceleration in business activity growth in the coming months, particularly for the goods producing sector.

The J.P.Morgan Global PMI Composite Output Index - produced by S&P Global - registered 52.0 in September, down from 52.8 in August. The latest reading indicated that growth unfolded at the slowest pace since January and is broadly indicative of the global economy growing at an annualized rate of 2.5%. This marks a deceleration from the 2.9% expansion in the second quarter, with the reading also below an average GDP growth rate of 3.1% in the decade prior to the pandemic.

The latest global economic expansion remained uneven with the service sector driving growth while manufacturing output fell for the first time since last December. A deepening of the demand downturn in the manufacturing sector was attributed partly to falling trade flows. By region, production fell mainly among firms in developed economies, though emerging market manufacturing output growth also slowed to the softest in nearly a year and was only marginal.

Forward-looking indicators suggest that a further slowing in economic growth may be anticipated in the coming months. Business optimism notably slipped to the lowest in nearly two years while incoming new orders growth decelerated to a near-neutral level in September. The weakness of demand in the goods producing sector was especially notable, with manufacturing new orders falling at the fastest rate since December 2022 and future expectations among manufacturers less optimistic than their service counterparts. As such, we will be watching the upcoming flash PMI release for the earliest fourth quarter insights on economic conditions among major developed economies on October 24th.

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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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.