Global economic growth accelerated in October, driven by significant expansions in the service sector, while manufacturing output showed signs of stabilization. According to the J.P. Morgan Global PMI Composite Output Index, produced by S&P Global, the global economy registered a reading of 52.3 in October, up from 51.9 in September. This uptick is indicative of global economic growth at an annualized rate of 2.6 percent, which is slower than the 2.9 percent growth recorded in the second quarter of 2024 but remains above the historical average GDP growth rate of 3.1 percent seen in the decade prior to the pandemic.
Service Sector Growth and Stabilizing Manufacturing Output
The global expansion in October was primarily driven by rapid growth in the service sector, while manufacturing output showed signs of stabilization after months of contraction. Business optimism, particularly in the service sector, rose sharply, with improvements also seen in manufacturing. However, these positive shifts were concentrated primarily in the United States, with sentiment in Europe and much of Asia dampened by ongoing geopolitical concerns.
Despite the slowdown in growth compared to the previous quarter, improvements in business sentiment and output indicate that further expansions are expected in the coming months, especially in the service sector, which has been the main contributor to global economic recovery.
Employment Trends and Inflationary Pressures
On the labor front, global employment has recently shown a decline, largely due to deeper job cuts in the manufacturing sector. Meanwhile, hiring in the service sector has slowed, nearly coming to a halt in some regions. This shift reflects the broader global trend of economic adjustments, with a focus on restructuring employment practices in response to changing sector demands.
Inflationary pressures eased further in October, contributing to more favorable economic conditions globally. The reduction in inflation provides room for central banks worldwide to consider further interest rate cuts, potentially stimulating economic activity in the coming months.
Commodity Prices and Global Inflation Trends
Commodity prices experienced increases across multiple sectors in October. Energy prices rose by 2.4 percent, with natural gas leading the charge, while coal prices surged by 5.3 percent. Food prices climbed by 1.4 percent, and metal prices saw a notable rise of 5.0 percent. The FAO Food Price Index (FFPI) rose to 127.4 points in October, marking its highest level in 18 months. This represents a 2.0 percent increase on a month-on-month basis and a 5.5 percent rise on a year-on-year basis. However, the FFPI remains 20.5 percent below its peak from March 2022, indicating that while prices are rising, they are still below the levels seen at the height of the pandemic-driven commodity crisis.
US Economic Performance and Federal Reserve Actions
In the United States, GDP grew at a rate of 2.8 percent in the third quarter, slightly below expectations and a modest decrease from the 3.0 percent growth seen in the second quarter. Despite this, the growth rate remains above the historical trend of 1.8-2.0 percent for the US economy. Strong growth and a job market with relatively low inflationary pressures prompted the Federal Open Market Committee to lower its benchmark overnight borrowing rate by 25 basis points, bringing the target range to 4.50%-4.75%. The Federal Reserve’s action reflects the central bank’s confidence in the economy’s resilience and signals its intent to support growth moving forward.
Growth Prospects and Pakistan’s Export Market
Looking ahead, the global economic situation remains somewhat mixed but continues to show signs of recovery, particularly in the service sector. The outlook for global demand suggests that economic conditions are improving in key export markets for Pakistan, including the US, UK, Euro Area (EA), and China. All of these regions are experiencing growth in their Composite Leading Indicators (CLI), suggesting an uptick in demand for Pakistan’s products and commodities. This presents a favorable environment for Pakistan’s export performance in the near term, as demand for its goods continues to rise in line with global economic recovery.
Conclusion
The global economy is on a path of steady recovery, marked by strong service sector growth and stabilization in manufacturing. Despite regional differences, with concerns in Europe and Asia, optimism for further economic expansion remains intact. The easing of inflationary pressures, coupled with stable commodity prices, creates a conducive environment for global growth. For Pakistan, the improved economic climate in major export markets bodes well for future trade prospects, suggesting an optimistic outlook for the country’s exports in the coming months.