Growth of output eased in both the global manufacturing and service sectors in December. In fact, worldwide services and manufacturing activity slipped in December to mark its weakest expansion since May 2003, largely a result of a sharp slowdown in the United States, even as cost pressures stayed high, the JPMorgan Global All-Industry Output Index this month shows.

The index fell to 53.5 in December from 54.0 in November, still above the 50 mark that divides growth from contraction.

"The second half of 2007 has seen growth of the global economy slip from June's high to a 55-month low in December," David Hensley, Director of Global Economics Coordination at JPMorgan, said in a statement. "With credit markets still tight, oil prices breaching nominal records and the more forward-looking components of the PMI survey, such as new orders, offering little evidence of an imminent upshot in demand, expect global economic conditions to remain subdued through Q1 2008."

In two separate reports, JP Morgan notes that global manufacturing production and new orders expanded at the slowest rates for four-and-a-half years in December, and the slowdown of the global service sector continued during the same period with growth of activity at its lowest since May 2003.

Global Manufacturing
Rates of expansion in world manufacturing production and new orders both eased in December.
At 51.4 in December, the JPMorgan Global Manufacturing PMI fell to its lowest level for almost four-and-a-half years and signaled only a slight improvement in the overall health of the sector.

U.S. manufacturing output declined for the second time in Q4 2007 in December, and at the fastest rate since March 2003, as the level of new orders received contracted at the sharpest pace in over six years.

Conditions strengthened slightly in the Asia-Pacific region, with output expanding at faster rates in Japan, China, India and Australia. Growth was especially robust in India, where new work rose at a survey record pace. The rate of expansion steadied in the Eurozone, despite noticeable disparities in the performances of the major euro area economies: faster increases in France and Germany contrasted with near-stagnation in Italy and Spain.

Although the labor market exhibited less buoyancy than earlier in the year, jobs were still being created as 2007 came to a close. At 50.9 in December, the Global Manufacturing Employment Index remained above the no-change mark of 50.0 for the thirty-first successive month. Jobs were added in the Eurozone and the U.K., both at their fastest rates during Q4 2007, and Japan (six-month high). Manufacturing employment fell in the U.S. and was broadly unchanged in China.

Global Services
In December, growth of the global service sector was at its lowest for over four-and-a-half years, according to the JPMorgan Global Services Business Activity Index posted 53.8, a level indicative of a solid expansion, but well below its long-run average of 56.5. This came after the global service sector eased through most of the second half of 2007.

Rates of growth eased in the U.S. non-manufacturing sector, as the U.S. non-manufacturing sector saw growth of business activity hit a nine-month low in December.

The U.K. service sector posted a slight acceleration, though it remained below the global average, and rates of growth eased in the Russian and Eurozone service economies. In Russia, activity rose at the slowest pace for seven months. In the Eurozone, the rate of expansion was the slowest for two-and-a-half years.

Within the euro area, there was a noticeable disparity between the performance of Eurozone service economies: Growth in France remained close to November's peak; in Germany (weakest for 34 months) and Spain, it was only slight; and it contracted in Italy for the first time since August 2005.

The global reports are based on the results of surveys carried out in a number of major countries of manufacturing output and GDP contribution, including the U.S., the U.K., France, Russia and Ireland, among others.

Resources

JPMorgan Global PMI: Report on Manufacturing and Services
Jan. 4, 2008

JPMorgan Global PMI: Global Report on Manufacturing
Jan. 2, 2008

JPMorgan Global PMI: Global Report on Services
Jan. 4, 2008

JPMorgan

Institute for Supply Management

NTC Economics