Is the global economic recovery losing momentum?

Doha: Earlier last year, when the spillovers from the pandemic produced unprecedented negative economic shocks, activity indicators plummeted. The global manufacturing Purchasing Managers’ Index (PMI), a survey-based indicator that measures whether several components of activity improved or deteriorated versus the previous month, bottomed at an all-time low of 39.6 in March 2020. Traditionally, an index reading of 50 serves as a threshold to separate contractionary (below 50) from expansionary (above 50) changes in business conditions.

But as major economies gradually re-opened and policymakers supported demand with aggressive stimulus, the global manufacturing PMI improved markedly, suggesting a big thrust from the economic recovery. In fact, the indicator has been in expansion territory for 13 months in a row now and even reached all-time highs of 56 in May 2021. While the latest print of 55.4 for the global manufacturing PMI is rather strong and comfortably within expansion territory, there are signs that growth has peaked and that the global economic recovery is set to moderate moving forward. QNB’s analysis delves into the latest global PMI print and the three main reasons why it is suggesting that peak global recovery is behind us.