Global economy maintained expansion at end of 2012

The new year has started with some positive signs for the global economy.

Surveys of purchasing managers around the world showed that the global economy continued to expand in December. The JPMorgan global all-industry output index rose to 53.7 last month from 53.6 in November.

JPMorgan Global All-Industry Indices
	November	December
Output	53.6	53.7
New orders	52.2	52.9
Input prices	55.0	55.1
Employment	50.0	52.3

Improvement in the purchasing managers' data from the United States again helped drive the improvement in the global reading. Markit's US manufacturing PMI rose to 54.0 in December from 52.8 in November. The Institute for Supply Management's manufacturing PMI was less positive but still showed a return to expansion in December at 50.7, rising from 49.5 in November. The ISM's non-manufacturing index rose to 56.1 from 54.7.

Adding to evidence of continuing growth in the US, the employment report for December showed that nonfarm payrolls increased by 155,000 last month after increasing by 161,000 in November.

In the euro area, the contraction in the economy slowed in December. Markit's composite output index rose to 47.2 in December from 46.5 in November. The manufacturing PMI fell to 46.1 from 46.2 in November but the services business activity index rose to 47.8 from 46.7.

Meanwhile, economic expansion continued in China in December. The HSBC composite output index rose to 51.8 from 51.6 in November. The manufacturing PMI from the China Federation of Logistics and Purchasing and the National Bureau of Statistics was unchanged at 50.6 in December while HSBC's China manufacturing PMI rose to 51.5 from 50.5 in November. For the services sector, the official PMI rose to 56.1 in December from 55.6 in November but HSBC's services PMI fell to 51.7 from 52.1.

Moving in the opposite direction though was Japan, where Markit's composite output index fell to 49.3 in December from 49.9 in November. The manufacturing PMI fell to 45.0 in December, a 44-month low, from 46.5 in November. The services business activity index rose to 51.5 in December from 51.4 in November.

Still, the improvement in global economic data was enough to move David Hensley, Director of Global Economics Coordination at JPMorgan, to note in the global purchasing managers survey report: “The global economy is therefore entering the new year on a positive footing and, with trends in demand and other forward-looking indicators still supportive, should maintain this momentum in the coming months.”