Global PMI edges higher in May as confidence recovers, but growth remains subdued

The worldwide PMI surveys - produced S&P Global in association with ISM and IFPSM for J.P.Morgan - signalled improvements in terms of current and expected future output growth in May. However, on both measures the survey data remained subdued by long-run standards, adding fuel to expectations of weak global economic growth this year.

S&P Global Market Intelligence is forecasting 2.2% global GDP growth in 2025, down from 2.8% in 2024. Barring 2020, when the pandemic caused global GDP to decline, that would be the slowest global expansion since the global financial crisis of 2009.

Weakness in May was led by the emerging markets, with mainland China notably slipping into decline for the first time in nearly two-and-a-half years. However, there were few signs of resilience in the developed world: while Canada reported the steepest contraction of all the major economies surveyed, near-stalled growth was recorded in all other major developed economies bar the US.

While US policy announcements, principally relating to changing tariffs, were again cited as the main cause of weak demand and subdued optimism about the outlook, it was encouraging to see reports of "uncertainty" become less widely reported worldwide than in April.

Global PMI posts only modest uplift in May

S&P Global Market Intelligence's PMI surveys indicated that global business activity expanded at an increased rate in May, though the pace was still the second-slowest since late 2023.

The headline J.P. Morgan Global Composite PMI Output Index, covering manufacturing and services in over 40 economies, rose from 50.8 in April to 51.2 in May. Any reading above 50.0 indicates growth compared to the prior month, meaning the current PMI merely signals an increased but still modest pace of expansion. April's reading had been the lowest since November 2023.

At its current level, historical comparisons indicate that the PMI is broadly consistent with the global economy growing at an annualized rate of 2.0% in May. This compares with an average GDP growth rate of 3.1% in the decade prior to the pandemic and an estimated 3.0% rate in the past three years.

Emerging market growth falters

Having largely stalled in April, developed markets reported an improved - though still sluggish - rate of growth in May, but emerging markets saw growth drop to the slowest since December 2022. The weakening emerging market picture reflected a renewed decline in manufacturing. While service sector output continued to rise across the emerging markets collectively in May, manufacturing output fell for the first time since November 2022.

Emerging markets hit by deteriorating manufacturing performance

Among the major emerging markets, the largest deterioration was recorded in mainland China, where output slipped into decline for the first time since December 2022 as modest services growth failed to counter a manufacturing sector's renewed downturn, which saw factory output drop at a rate not seen since November 2022. Output also fell in Brazil, for a second successive month, led by a manufacturing downturn on a scale not seen since July 2023. In contrast, strong growth continued to be reported across both goods and services in India, and Russia's output lifted higher for the first time in three months.

Canada lags while the US leads the developed markets

Among the major developed economies, by far the worst performance was again recorded in Canada, where output fell for a sixth successive month. Though the rate of decline moderated in May, it remained steep as companies widely blamed US tariffs and broader uncertainty emanating from US policy for lost business.

Output was meanwhile largely unchanged in the eurozone, Japan, the UK and Australia, with each eking out only marginal output gains, leaving the US as the only major developed economy to report any noteworthy expansion of output during May (albeit with some variations in performance recorded within the eurozone: both Italy and Spain reported growth, offset by contractions in Germany and France). US growth accelerated from a near-stalled picture in April, though merely to the fastest since March, as an improved service sector performance offset a third successive monthly drop in manufacturing output.

Global business confidence rebounds

Other indicators from the global PMI also improved. New orders grew at a slightly faster rate (though still merely posting the second-smallest gain over the past 17 months), jobs growth ticked up to a four-month high and backlogs of work fell to the smallest extent for six months. However, the biggest improvement was seen for future output expectations, where optimism rebounded to reverse the slump seen in April, which had seen expectations hit their lowest since the pandemic lockdowns of early-2020 amid widespread concerns over US tariff policy.

Although improved confidence was reported in all major developed and emerging markets bar only India and Russia in May, often linked to pauses on higher rate US tariffs, the overall level of global confidence remained below its long-run average, principally reflecting ongoing concerns over the adverse impact of US policy changes, according to anecdotal evidence from companies participating in the surveys.

Below long-run average confidence was again seen in all major developed economies as well as in mainland China, the latter remaining especially weak relative to its long-run average.

Tariff impact intensifies, but uncertainty moderates

Analyzing the anecdotal evidence collected in the PMI surveys, May saw signs of an intensifying adverse impact from tariffs on prices, exports and output expectations. However, more encouraging was the tracking of business uncertainty, reports of which moderated compared to April's recent near-record peak. Although uncertainty is still elevated by historical standards, running at just under four-times the long-run average, the survey data at least hint at a possible peaking of the disruptions to business decision making emanating from recent political and trade developments.

Access the latest global PMI press release here.

Chris Williamson, Chief Business Economist, S&P Global Market Intelligence

Tel: +44 207 260 2329

chris.williamson@spglobal.com

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Purchasing Managers' Index™ (PMI^®) data are compiled by S&P Global for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.