Global economy near stagnation in June

Economic reports last week showed that the global economy continued to lose momentum at the end of the second quarter.

Surveys of purchasing managers around the world showed that the global economy was close to stagnation in June. The JPMorgan global all-industry output index fell to 50.3 in June from 52.1 in April.

JPMorgan Global All-Industry Indices
	May	June
Output	52.1	50.3
New orders	52.2	50.5
Input prices	51.6	49.4
Employment	50.7	51.1

In the US, the Institute for Supply Management's manufacturing PMI fell to 49.7 in June from 53.5, dropping below the neutral 50 mark for the first time in almost three years. Services activity also slowed, with the ISM's non-manufacturing index falling to 52.1 in June from 53.7 in May.

In the euro area, Markit's composite output index rose to 46.4 in June from 46.0 in May, staying well below the 50 mark. The eurozone manufacturing PMI was unchanged at 45.1 as the services PMI rose to 47.1 from 46.7.

In China, the manufacturing PMI from the National Bureau of Statistics and China Federation of Logistics and Purchasing fell to 50.2 from 50.4 in May while HSBC's manufacturing PMI fell to 48.2 from 48.4.

China's services sector appears somewhat stronger. The non-manufacturing PMI from the National Bureau of Statistics and China Federation of Logistics and Purchasing rose to 56.7 in June from 55.2 in May but HSBC's services PMI fell to 52.3 last month from 54.7 in May.

In Japan, Markit's composite output index fell below the neutral 50 mark to 49.1 in June from 50.1 in May. The Markit/JMMA manufacturing PMI fell to 49.9 in June from 50.7 in May while the services business activity index fell to 49.3 from 49.8.

Beyond the purchasing managers' surveys, other economic data released last week were mixed.

The US employment report last Friday was disappointing. Non-farm payrolls increased by just 80,000 in June compared to the median projection of 100,000 from a Bloomberg survey. The unemployment rate stayed at 8.2 percent.

US employment has increased by an average of just 75,000 per month in the second quarter, down from an average of 226,000 in the first quarter.

In Japan, the economy also provided another sign of weaker growth last week. The Cabinet Office's coincident index of economic indicators fell to 95.8 in May from 97.0 in April.

However, not all the data on Japan were negative. The leading index of economic indicators rose to 95.9 in May from 95.6 in April. Also, the Bank of Japan's Tankan survey showed that the large manufacturers' sentiment index improved to minus one in the second quarter from minus four in the previous quarter while the index for large non-manufacturing firms rose to eight from five.