Signs of a slow­down in the global econ­omy, but prices are ris­ing

Mint Asia ST - - Mark To Market -

EDG­ING LOWER

The

Jpmor­gan Global Com­pos­ite Pur­chas­ing Man­agers’ In­dex (PMI), a gauge of eco­nomic ac­tiv­ity in both the man­u­fac­tur­ing and ser­vices sec­tors across the world, came in at 52.8 in Septem­ber, the low­est read­ing in the last two years.

That is a glim­mer of hope that the rise in crude oil prices will be met with slow­ing de­mand, forc­ing a cap on them. With world­wide man­u­fac­tur­ing pro­duc­tion too ris­ing at the slow­est pace in two years, in­put prices may also start to cool. Chi­nese and Asean (As­so­ci­a­tion of South­east Asian Na­tions) man­u­fac­tur­ing PMIS for Septem­ber have been weak. The US Com­pos­ite PMI, at 54.7, showed solid growth, al­though it’s the weak­est since Jan­uary. Un­for­tu­nately, prices are on the rise. The US PMI sur­vey said: “The com­bi­na­tion of re­duced spare ca­pac­ity and ro­bust do­mes­tic de­mand is driv­ing prices charged for goods and ser­vices higher at a rate not seen since the global fi­nan­cial cri­sis.” That ac­counts for the sharp rise in US yields and in­di­cates that the Fed­eral Re­serve will con­tinue with its mon­e­tary tight­en­ing.

The global re­port also points out that out­put charges in­creased at the quick­est pace since the se­ries be­gan in 2009. In­ter­na­tional trade was par­tic­u­larly weak with world­wide new ex­ports fall­ing for the first time in over two years. It’s un­sur­pris­ing then that global busi­ness op­ti­mism is the low­est in two years.

The Re­serve Bank of In­dia’s mon­e­tary pol­icy re­port sums up the sit­u­a­tion. It says: “Global eco­nomic ac­tiv­ity has so far re­mained re­silient to ongoing trade con­flicts, geo-po­lit­i­cal ten­sions and tight­en­ing fi­nan­cial con­di­tions. How­ever, fi­nan­cial mar­ket volatil­ity has in­creased as in­vestors con­tin­u­ously re­assess the im­pact of un­fold­ing events. More omi­nously, global trade growth has be­gun to slow down. The in­fla­tion out­look has de­te­ri­o­rated in many AES (ad­vanced economies) and EMES (emerg­ing mar­ket economies). These de­vel­op­ments taken to­gether will pose a ma­jor chal­lenge to global growth prospects in the com­ing quar­ters and years.”

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