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RIYADH: International economic growth showed resilience in June, maintaining the second highest level in the last 13 months, according to S&P Global’s latest report based on the Purchasing Managers’ Index.

The JP Morgan global composite PMI compiled by S&P Global fell to 52.9 points in June from 53.7 points in May. This slight decline reflects a slowdown in the pace of expansion in manufacturing production and service sector business activities worldwide.

Amidst this global trend, Saudi Arabia’s non-oil private sector PMI remained strong at 55 in June, driven by rising demand, increased production levels and a significant rise in employment.

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

“The global all-sector manufacturing PMI fell 0.8 percentage points to 52.9 in June, and the decline was quite broad across sectors and regions. Although it suggests some loss of momentum in the middle of the year, the index is still in line with a steady pace of global gross domestic product expansion,” said Bennett Parrish, global economist at JP Morgan.

He added: “The decline in new orders and future output PMIs may raise the risk of further moderation in growth, but another uptick in the employment PMI suggests underlying fundamentals remain resilient.”

Growth in the US and India is accelerating

The report highlighted the accelerated pace of PMI growth in the US, India and Brazil. U.S. output expanded at the fastest pace since April 2022, driven by strong services activity that offset subdued manufacturing growth.

India led the BRIC economies with strong growth momentum, recovering from an election-related slump in May, marking one of the strongest performances in the goods and services sector in 14 years.

Similarly, Brazil expanded strongly throughout the year, with both the service and manufacturing industries making positive contributions after nearly stagnant growth in May.

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

On the other hand, output decreased in Canada, increasing briefly in May for the first time in a year due to the weakening of the service sector.

“Japan has also slipped back into decline. Although only marginal, the decline was registered for the first time in seven months. The first decline in services sector output in 22 months was partially offset by the first increase in manufacturing output in 13 months,” Williamson added.

Russia reported a slight drop in output, the first decline in 17 months, as a sharp decline in service activity offset resilient manufacturing growth.

Growth also slowed in China, although it only recouped some of the significant improvement seen in May, so it was still one of the strongest expansions of the past year. But strong growth in the Asian giant’s manufacturing industry helped offset a sharp slowdown in services activities in June.

Meanwhile, the UK reported its eighth consecutive monthly expansion. However, growth in manufacturing and services slowed, resulting in the weakest recovery this year, although this was partly due to a shutdown in spending ahead of the upcoming election, S&P Global added.

Global subsectors are stable

The US-based company noted that amid a slowdown in expansion, growth was broader across all global sub-sectors.

“All 25 subsectors covered by the PMI avoided a global contraction in June for the first time since July 2021. Expansion was reported in general industrial sectors, which reported stable production,” Williamson said.

The report noted that output grew the fastest in the financial services category, while the business services, consumer goods and intermediate goods sectors also saw strong expansion.

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

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

In June, global employment increased for the second month in a row, with the rate of job growth reaching the highest level in the past year in both the manufacturing and service sectors.

“Both in the manufacturing industry and in the service sector, a stronger increase in the number of employees has started, with a stronger increase again in the latter. Among the countries covered by the survey, only China and Germany saw headcount decrease,” S&P Global said.

Future prospects

Looking ahead, S&P Global warned of a darkening near-term global outlook in June, with business expectations for the year ahead hitting a seven-month low, particularly with post-election uncertainties in India and Europe, including the UK and France.

“However, public sentiment was also weighed down by concerns about the demand environment, reflected in a decline in new order growth from May’s one-year peak, leaving the backlog largely unchanged during the month. The latter is typically a sign that the current capacity is sufficient to meet existing needs,” the office concluded.

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