Global economic acceleration still leaves eurozone economy shrinking

Last week's data showed that the global economy probably picked up pace at the end of 2011 but the eurozone economy is likely to have contracted nevertheless.

The JPMorgan global all-industry output index derived from surveys of purchasing managers around the world rose to 53.0 in December, a nine-month high, from 52.0 in November.

JPMorgan Global All-Industry Indices
	November	December
Output	52.0	53.0
New orders	50.7	51.2
Input prices	55.8	55.9
Employment	49.6	50.2

Global economic growth in December appears to have been pushed up by the United States, where the purchasing managers indices for both manufacturing and services came in comfortably above the 50 mark that separates expansion from contraction. The Institute for Supply Management's manufacturing PMI rose to 53.9 in December from 52.7 in November while the non-manufacturing index rose to 52.6 from 52.0.

Japan saw both manufacturing and services move from contraction to expansion in December, albeit barely. The Markit/JMMA manufacturing PMI rose to 50.2 in December from 49.1 in November while the Markit services business activity index rose to 50.4 from 49.5.

As has been the case in recent months, the euro area held down global growth in December. However, even this troubled region saw improvement in the purchasing managers indices. Markit's eurozone composite output index rose to 48.3 in December from 47.0 in November. The manufacturing PMI rose to 46.9 in December from 46.4 in November while the services index rose to 48.8 from 47.5.

Despite the improvement in December, Chris Williamson, the chief economist at Markit, said in the December PMI report that “the fourth quarter saw the steepest contraction since the spring of 2009, and forward-looking indicators suggest that a further decline is on the cards for the first quarter of 2012.”

Other economic reports last week supported the view that the US economy ended 2011 on a relatively strong note while the eurozone economy deteriorated.

The US Labor Department's report on employment on Friday showed that the economy added 200,000 jobs in December. This pushed the unemployment rate down to 8.5 percent from 8.7 percent in November.

In the euro area, the European Commission's economic sentiment indicator fell to 93.3 in December from 93.8 in November. This was the tenth consecutive monthly decline in the indicator and brought it down to the lowest level since November 2009.

So there is a good chance that the euro area entered a recession at the end of last year. However, the improvement in global economic indicators discernible from last week's data indicate that there was probably no global recession in 2011.