The October purchasing managers’ surveys have just been released and they are unfortunately very sad. Indeed, the JP Morgan composite PMI “World” index fell to 50, its lowest since January 2023, which heralds the return of the global economy to a phase of stagnation (NB: PMI indices are very simple to understand : above the 50 mark, they announce an increase in economic activity, below, a decline). In this context, the annual shift in global GDP should fall between 0 and 1% by the start of 2024, the lowest since 2009, excluding the exceptional recession of 2020 which was linked to the coronavirus pandemic and multiple confinements.
As shown in the table below, only three countries have composite PMI indices above 53.0, i.e. in line with growth above 2.5-3%, in this case India (58.4), Saudi Arabia (58.4) and Russia (53.6). Three countries narrowly avoided recession, with indices slightly above 50: the United States (50.7), Japan (50.5) and Brazil (50.3). Enough to confirm that after having rebounded significantly in the third quarter of 2023, American growth should slow down but remain appreciable until the beginning of 2024.
Recession and public debt: “France will bear the brunt of the end of the era of low rates”
The Chinese economy is in difficulty, the Middle Kingdom is on the verge of recession
All the other major “major countries” in which these surveys are carried out are either in economic stagnation or in a phase of declining activity. Starting with China, with a composite PMI index of just 50, the lowest since December 2022. A poor performance which shows that, even if it does not plunge back into recession, the Chinese economy will take time to digest all its past excesses, particularly on the front of the real estate construction sector. Confirming these difficulties, the Chinese trade balance surplus fell to $56.53 billion in October, the lowest since April 2022. Over 12 months, it fell to $862.8 billion, which is certainly still very appreciable but constitutes a floor since June 2022.
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The euro zone will confirm its return to recession in the coming months
On the other side of the border, that is to say in a recession zone, the sanction is increasingly heavy, in particular for the countries of the Economic and Monetary Union (EMU). No member of the latter is in a situation of progress in economic activity. Even the Irish “champion” has fallen back into a zone of falling GDP. For the entire EMU, the composite PMI index fell to 46.5, only 0.2 points better than the August 2023 level which was the lowest since November 2020.
Germany also continues to plunge, with an index of 45.9, the lowest since May 2020, excluding the August 2023 level of 44.6. In this context, after having already declined in the third quarter of 2023, the GDP of Germany and the entire Euro Zone is expected to decline further in the fourth quarter of 2023, confirming the official return of recession.
Inflation, recession, debt… will France soon go bankrupt?
France is the red lantern of the world economy, a shift into recession is expected
The worsening of the recession could certainly seem surprising in view of the fall in inflation, which is supposed to improve the economic situation. In fact, this is not the case: in fact, it is precisely the movement of disinflation which is linked to the decline in economic activity. Finally, as has been observed since last June, France has once again distinguished itself by remaining the red lantern of the world economy, with a composite PMI index of 44.6, after 44.1 in September, levels which have been lows since November 2020, that is to say in the middle of the “pandemic” recession. In this context, after narrowly avoiding a drop in GDP in the third quarter of 2023, the French economy is also expected to fall into recession from the fourth quarter of 2023.
Marc Touati, economist, president of the ACDEFI firm, author of 8 economic best sellers, including RESET II – Welcome to the world after, released in September 2022.
You can also find his video reviews on his YouTube channel, which has more than 110,600 subscribers, including the latest : “Stagflation, deficits, real estate… where is France going? Where is the world going?