Global Re-Growth

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Different economic indicators have shown mixed results on the global growth outlook as of late. Is it really growth or is it global re-growth as growth appears to be reaccelerating? I hope to look at the current predicament to get a well-rounded view of the current situation.

Growth Measures

HSBC released its Emerging Markets Index (EMI), which is derived from the numerous Purchasing Managers’ Indexes for December last week. They showed that growth was broad-based across the economies at the end of 2013, but that growth eased from November’s eight-month high. The index dipped below 50 mid-year for a heartbeat and rallied through November. Technically, the reading is still expansionary, but the deceleration was across the board in every component of the measure. China, Brazil, and Russia are only marginally above a flat economic reading while India is still under 50 (contracting activity) on the index. Overall, the EMI has had a nice rally from mid-2013, but it is still too soon to call it a bottom.

hsbc emerging markets index

The Economist publishes the percentage change on a year earlier for World GDP based on 54 countries representing 90% of world GDP at purchasing-power parity. Their chart also shows that after 18 months, output has started to increase over the same period a year ago. It also shows just how important China is to global growth as of late; with nearly half of GDP growth stemming from growth in China. We can see here why economists have placed importance of the global growth story on China’s shoulders.

world gdp

The IMF has a global growth indicator of its own. It’s semi-annual World Economic Outlook report was released in October showing they also see a positive year-over-year change in GDP growth for advanced economies (which started in mid-2012) and for emerging market and developing economies (starting in 2013).

gdp growth

Here I’m putting together some regional PMI data across different regions from different sources (JP Morgan Global manufacturing PMI, ISM manufacturing PMI, Markit’s Eurozone Manufacturing PMI, Markit and Nomura Securities manufacturing PMI, and China Federation of Logistics and Purchasing’s China Manufacturing PMI). They all seem to be preaching the same sermon with the U.S. leading the way. It seems that growth is picking up after a long stint between 2011 and 2013.

global PMIs
Source: PFS Group, using Bloomberg data

Another indicator showing the pickup in global activity is the Baltic Dry Shipping Index, which covers the shipping of dry bulk carriers. While not necessarily an indicator of oil shipments, it does indicate that more coal, iron ore, and grain are being shipped, indicating that global economic activity is beginning to pickup.

baltic dry index
Source: Bloomberg


It appears that growth was accelerating into the end of 2013 after a mid-cycle slow-down in economic activity that began in 2010. There are still many risks to this trend. We know that while many central banks have been accommodative, with Japan leading the way, we realize how important China has been to global growth indicators and their doesn’t seem to be much stimulus in the wake of their year-end policy meeting on December 13th. Premier Li Keqiang has said economic growth of at least 7.2 percent was needed to keep a lid on unemployment; Chinese leadership will try to prevent growth going lower than their current 7.5 percent target for 2014. According to Reuters, Li Huiyong, chief economist at Shenyin & Wanguo Securities in Shanghai, has said that stability is the number one priority. So if the global growth story is really going to take any meaning in 2014, it will likely need to come from some other country.

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About Ryan Puplava CMT