Do Surveys Say Global Growth Is Stalling?

November’s final purchasing managers’ indexes (PMIs, surveys attempting to tally growth’s breadth) hit the wires early this week, with headlines bemoaning weakness in Europe and mixed data in America and Japan. While the new releases are worth weighing, we don’t think they reflect any material change in the economic backdrop a month before yearend. As 2025 nears, the trends long driving growth seemingly remain.

As Exhibit 1 shows, America’s composite S&P Global PMI—which combines services and manufacturing—hit 54.9 in the month, up from October’s 54.1 (readings above 50 mean more responding firms reported growth than contraction). UK and Japanese composite and services PMIs also topped 50, albeit by much narrower margins.

Exhibit 1: American Growth Increasingly Stands Out

Source: FactSet and S&P Global, as of 12/4/2024.

For America, mid-50s composite and services readings suggest fairly broad-based growth—though PMIs never reveal how much they grew or shrank in output or magnitude terms. Manufacturing remains below 50—like most of the rest of the world—indicating contraction. But services, the vast majority of US economic activity, hit a 32-month high in S&P Global’s survey.

This seems to partly reflect brighter moods among respondents, with the uncertainty of the election behind us. Although PMIs are generally considered as gauges of production and orders, sentiment factors into them as well. Some questions incorporate purchasing managers’ business forecasts, which are inherently opinionated. As S&P Global’s US Manufacturing PMI noted in its November release:

“Optimism about the year ahead has improved to a level not beaten in two and a half years, buoyed by the lifting of uncertainty seen in the lead up to the election, as well as the prospect of stronger economic growth and greater protectionism against foreign competition under the new Trump administration in 2025.”^[i]

Or for services:

“Companies have reported stronger demand for services thanks to the clearing of political uncertainty following the election, as well as brighter prospects for the economy in 2025 linked to the incoming administration and hopes for lower interest rates.”^[ii]

However, a separate US services PMI conducted by the Institute for Supply Management (ISM) showed growth narrowed marginally—largely on sentiment around possible tariffs from the incoming administration or how the cabinet shakes out.^[iii]

In our view, rather than any particular result, just having a clear and uncontested outcome provided a sense of relief, yet ISM’s survey suggests there may be a further clarity boost in the coming weeks. Whether specific policy goals some now expect will—or won’t—be achieved is another matter.

In contrast, attitudes darkened across the pond—though that has been par for the course for some time. Most notably, the eurozone’s services PMIs soured, crossing below the 50 threshold and joining longstanding manufacturing weakness. But we think it is premature to read too much into so-far shallow (save France) one-month dips. See Japan’s flip back over 50 last month.

Moreover, again, these aren’t magnitude gauges. If the minority of firms reporting expansion grew faster than the majority experiencing contraction, barely below 50 PMI readings won’t necessarily indicate falling output in metrics like GDP, which measure the volume of activity versus its breadth. See Japan: Its October manufacturing output accelerated to 3.0% m/m growth from September’s 1.5%, despite sub-50 manufacturing PMIs then.^[iv]

Or take the eurozone, including Germany and France. Although their manufacturing PMIs remain well below 50, their monthly manufacturing output has alternated between expansion and contraction all year. Meanwhile, eurozone GDP (including Germany and France) has expanded overall—at least through Q3.

And, here too, political uncertainty may be coloring firms’ economic outlooks. France’s recent budget battles toppled the government, with rhetoric touting a fiscal crisis that could sour the economy. (We don’t think that is very likely, but political speak isn’t about probable outcomes.) Similarly, budget disagreements in Germany spurred talk of snap elections now set for February. As those pass—like the UK budget and US elections—fears should fade, lifting attitudes.

Keep in mind that sub-50 PMI readings aren’t coming out of the blue. They occurred in 2022, too. Arguably, the headwinds then (e.g., inflation, geopolitics) were greater than today’s. But global growth weathered the storm without recession. Now, 2022 did feature a recession-less bear market. But the sentiment-driven headwinds then were surprising and legion—not so now. These data merely extend long-running trends we have seen throughout 2024.