Thought for the day

Global Growth Index Declines. Warning Signs Multiply


 
Last updated: 21 October 2024
 
World economic activity continues to grow when seen through the lens of the Sales Managers Indexes, in the world's three largest economies (China, the USA and India). But the rate of growth has now fallen for 9 consecutive months, and whilst remaining positive, is now only marginally so.

For most recent decades these three countries have collectively contributed close to 60% of total global growth, and in reality, probably significantly more, as the "rest of the world" in this case includes many countries with less reliable and often inflated data. In any event, if survey results from these three countries collectively are not looking good, as is currently the case, prospects for economic activity in the world as a whole are very likely to be diminished.

Much of the decline in the Global Index currently derives from falls in the Chinese Indexes.

The Indian economy in particular remains in full growth mode. But Confidence in the US economy is far from solid and should be watched closely by those of a nervous disposition.

The Global Sales Managers Index Falls Again
Diffusion Index. (50 = 'No Growth')
Global Growth Index Declines. Warning Signs Multiply
The chart shows the last 9 months of near continuous decline in the overall Global Sales Managers Index, as measured by collective data from China, the USA and India; the three biggest economic growth engines of the last quarter century.

These data provide a good indication that the world has avoided (in the third quarter seen as a whole) the much-predicted worldwide recession brought on by rising interest rates. Nevertheless, Sales Managers recent loss of confidence in the future suggests the fourth quarter of the year may well bring global economic growth down to lower levels, potentially tipping into recession in 2025. We must hope that the US Federal Reserve's recent big interest rate cut has not come too late in the day to turn the tables in the USA, and the managers of the previously all-powerful Chinese economy succeed in regenerating growth in China.
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