In October, global demand remained lacklustre, as the global composite Purchasing Managers’ Index (PMI) declined from 50.5 in September to 50.0 in October.
Global Demand Trends in October 2023
In October, global demand remained lacklustre, as the global composite Purchasing Managers’ Index (PMI) declined from 50.5 in September to 50.0 in October. This drop signifies a stagnation in global economic activity, with the manufacturing sector reflecting subdued demand conditions worldwide. While a disparity between manufacturing and service sectors persists, it has narrowed in recent months. Global manufacturing PMI remains in contraction territory, while the service sector’s growth rate is decelerating.
Regional Variations and Economic Activity
Europe continues to grapple with challenges in both manufacturing and services, as PMIs fall below the 50-point mark. In contrast, the United States experienced improved manufacturing and service sector activities in October, driven by domestic demand. Asian economies, led by India, outperformed their Western counterparts. However, early signs of a slowdown are emerging in Asia, with Mainland China’s Caixin manufacturing PMI dipping below 50, and rising oil prices contributing to higher input costs for Asian manufacturers.
Future Outlook and Labor Market
The outlook for global demand remains uncertain, with subdued global trade and ample inventories, coupled with weak new export orders. The chances of a rapid output rebound seem unlikely. Moreover, future outlook indices have moderated for several economies in October, prompting many companies to downsize their workforce. While labour market data generally remain strong, the latest PMI data may harbor early warning signs.
Analysing Service Sector Trends in October 2023
The service sector, which exhibited resilience throughout most of 2023, is now displaying signs of vulnerability. However, the situation in the service sector is more nuanced compared to manufacturing data, with the global services PMI dropping to 50.4 from 50.7, marking a nine-month low.
Eurozone’s Challenges
Like the manufacturing sector, the eurozone continues to be a major impediment to economic performance. The eurozone’s services PMI plummeted to 47.8 in October from 48.7. Within the region, the German services sector experienced the most significant decline, with the index falling by 2.1 points to 48.2. Conversely, France’s services PMI indicated a more moderate deceleration in October. Nonetheless, subdued new orders contributed to reduced sales and employment during the month.
Mixed Signals in the US
The situation in the US service sector presents a mixed picture. In October, the S&P Global services PMI inched up by 0.5 points to 50.6. Output expanded, but new orders remained lacklustre. Despite this, firms maintained an optimistic outlook and increased their staffing levels. Enhanced capacity enabled service providers to work through their outstanding business, reducing backlogs. Meanwhile, the ISM services, which had been outperforming the S&P metric, moderated in October, decreasing by 1.8 points to 51.8. However, this survey still reflects growth in 40 of the last 41 months, with new orders showing improvement for the month across all twelve industries.
Asian Service Sector Dynamics
Turning our attention to Asia, the service sectors in India and Mainland China expanded in October. While India saw a deceleration in sales, the services PMI remained comfortably above 50 at 58.4, down from 61.0. This slowdown was attributed to price pressures and competitive conditions. New orders remained robust, buoyed by international demand, which experienced the second-highest increase in the survey’s history.
In contrast, Mainland China’s service sector PMI edged up by 0.2 points to 50.4 in October. Subdued activity levels coincided with a further slowdown in new order growth, the weakest in 2023 thus far, despite an improvement in new export business. Consequently, companies exercised caution in hiring new staff, and the future outlook index declined to its lowest level since early 2020.
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