A Divergence in the Global Economy

Chart Divergence in the Global Economy

One of the best ways to keep your hand on the pulse of the global economy is to look at the Global Manufacturing & Services PMI reports. The reports compile survey data from executives around the world in both goods-producing & non-goods producing industries. As you can see in the chart above, after both reports surged in 2017, there has been a strong divergence between the two over the last year and a half. While the service sector of the global economy has held up quite well, manufacturing growth has ground to a halt. The slowdown in global manufacturing has been driven by an overall slowdown in global demand and has been exacerbated by trade conflicts. While this is certainly something that we are keeping our eye on, the good news is that manufacturing only makes up a fourth of global economic activity, with services making up the difference. Therefore, although manufacturing will likely struggle moving forward, the global economy should be able to maintain a decent, albeit slower pace of growth.