Today's Edition
A.SREENIVASA REDDY (ABU DHABI)
The global economy continued to grow in February, with the J.P. Morgan Global Composite PMI coming in at 51.5. Although this was a slight dip from January's 51.8, the index stayed well above the neutral 50.0 mark, indicating growth for the 25th month in a row. The manufacturing sector played a significant role in this growth, as the Global Manufacturing PMI hit an eight-month high of 50.6, up from 50.1 in January.
In February, the global manufacturing sector moved further into expansion territory. The growth of manufacturing production picked up speed, reaching its fastest rate since June 2024, driven by a stronger influx of new business. Production in the consumer and intermediate goods sectors increased, while investment goods production stabilised after a prolonged period of decline. The rise in new orders was the fastest in nearly three years, signaling improved demand conditions.
Bennett Parrish, Global Economist at J.P. Morgan, noted: "The global manufacturing output PMI continued to rise in February, increasing by 0.9 points to an eight-month high of 51.5. The output improvement last month was accompanied by slightly more modest gains in the new orders and employment components of the surveys. A rise in the orders-to-inventory ratio to a three-year high of 1.06 aligns with signs of broadening growth momentum.”
The service sector remained in expansion but at a slower pace. While it continued to outperform manufacturing, the gap between the two sectors narrowed in February. Growth slowed in business and consumer services, contrasting with an acceleration in the financial services sector.
Referring to the J.P. Morgan global all-industry PMI, Parrish said: “Still, at 51.5, the level of the output index remains consistent with global growth continuing at a trend-like pace early this year. A large sectoral gap between manufacturing and services looks to have fully closed in February and the US is no longer outperforming the rest of the world."
New business orders increased for the 16th consecutive month, although at a slower rate than in January. Encouragingly, all six monitored sub-sectors, which include both services and manufacturing industries, reported growth for the first time since May 2024.
Future business expectations remained in positive territory, with manufacturing sector optimism rising to a nine-month high. The orders-to-inventory ratio, often an indicator of future production cycles, climbed to its highest level in nearly three years. Despite some regional disparities, key economies including India, Indonesia, Brazil, and the United States recorded strong PMI readings, further reinforcing confidence in sustained global economic expansion.
While February's overall composite PMI signalled a slight moderation in growth, the renewed strength in manufacturing offers a positive outlook. As global businesses navigate evolving economic conditions, the continued expansion of both the manufacturing and service sectors points to resilience and adaptability in the face of changing market dynamics. With improved new orders, strengthening business confidence, and broad-based growth across key sectors, the global economy is poised for sustained momentum in the coming months.
