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RIYADH: International economic growth showed resilience in June, holding at the second-highest level seen in the past 13 months, according to S&P Global’s latest Purchasing Managers’ Index report.

The global JP Morgan Composite PMI, compiled by S&P Global, fell to 52.9 in June from 53.7 in May. The slight decline reflects a slowdown in the pace of expansion in manufacturing and services activity around the world.

Against this backdrop of global trends, Saudi Arabia’s non-oil private sector PMI remained at a high level of 55 in June, driven by rising demand, increased production levels and a noticeable increase in employment.

A PMI reading above 50 indicates economic expansion, while a reading below 50 indicates recession. It measures economic trends in manufacturing based on a monthly survey of supply chain managers covering upstream and downstream activities.

“The global manufacturing PMI fell 0.8 percentage points to 52.9 in June, with the decline broad-based across sectors and regions. While suggesting some loss of momentum in the middle of the year, the index is still consistent with a solid pace of expansion in global gross domestic product,” said Bennett Parrish, global economist at JP Morgan.

He added: “Declines in the PMI new orders and future production indicators could raise risks of a further slowdown in growth, but another rise in the PMI employment indicator suggests that underlying fundamentals remain resilient.”

Economic growth in the US and India is accelerating

The report highlighted accelerating PMI growth in the US, India and Brazil. In the US, manufacturing grew at the fastest pace since April 2022, driven by solid services activity that offset subdued manufacturing growth.

India, with strong growth and recovering from an election-related decline in May, has emerged as the top BRIC economy, one of the best performers in 14 years in the goods and services sector.

Similarly, Brazil maintained strong expansion throughout the year, with services and manufacturing sectors posting positive contributions after growth almost completely stalled in May.

“US growth continued to pick up slightly in June, bucking the broader slowdown in the developed world, while India continued to lead emerging markets by a wide margin,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

In Canada, production fell after a short-term increase in May for the first time in a year, mainly due to a weakening service sector.

“Japan also slipped back into recession. Although only marginal, it was the first recorded recession in seven months. The first contraction in service sector output in 22 months was partly offset by a rise in industrial production for the first time in 13 months,” Williamson added.

Russia posted a slight decline in output, its first decline in 17 months, as a significant drop in activity in services offset steady growth in industrial output.

Growth also slowed in China, though only recouping some of the significant gains posted in May to still post one of the strongest expansions in a year. But solid growth in the Asian giant’s manufacturing sector helped offset a marked slowdown in services activity in June.

Meanwhile, the U.K. posted its eighth consecutive monthly expansion. However, growth slowed in manufacturing and services, leading to the weakest recovery this year, although partly due to a pause in spending ahead of the upcoming election, S&P Global added.

Global stable sub-sectors

The US-based company saw growth become more widespread across all global subsectors, despite a slowdown in expansion.

“All 25 sub-sectors covered by the PMI avoided a global recession in June for the first time since July 2021. Expansion was seen across all sectors except general manufacturing, which reported stable output,” Williamson said.

The report noted that the fastest growth in output was in the financial services category, with significant expansion also seen in the business services, consumer goods and intermediate goods sectors.

However, the pace of expansion in the consumer services sector was relatively mild.

“Other notable events include a two-year peak in chemicals and plastics production and a 28-month peak in forestry and paper products production, while the automotive and parts sector closed its best quarter since the start of 2021,” the analysis added.

Global employment rose for the second month in a row in June, with job growth reaching a one-year high in both manufacturing and services sectors.

“Stronger employment gains were initiated in both manufacturing and services sectors, with the latter once again showing stronger growth. Of the countries surveyed, only China and Germany saw employment levels shrink,” S&P Global said.

Future perspectives

Looking ahead, S&P Global warned in June of a deterioration in the near-term global outlook, with business expectations for the year ahead hitting a seven-month low, hit particularly hard by uncertainty following elections in India and Europe, including the UK and France.

“However, sentiment was also dragged down by concerns about the future demand environment, reflected in a pullback in new order growth from May’s yearly high, which left the backlog of work largely unchanged during the month. The latter is typically a sign that existing capacity is sufficient to meet existing demand,” the agency concluded.

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