Global economic growth accelerates as outlook gloom intensifies

October's Purchasing Managers' Index surveys signaled an acceleration of global business activity growth to one of the fastest rates in the past 18 months. However, business expectations for the year ahead fell to one of the lowest levels since the pandemic, highlighting an unusual divergence between strong current output growth and declining business optimism.

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Faster global growth

A strong start to the fourth quarter was signaled by S&P Global Market Intelligence's Purchasing Managers' Index (PMI) surveys. The JPMorgan Global Composite PMI Output Index, which covers manufacturing and services in more than 40 economies, rose to 52.9 in October from 52.5 in September, the joint-highest over the past 17 months.

Historical comparisons indicate that the latest PMI is broadly consistent with global GDP growing at an annualized rate of 3.0%. This follows a robust third quarter, for which the PMI signaled a 2.8% pace of growth.

The survey data suggest that global economic growth has improved markedly since the low in April, when activity slowed in response to US tariff uncertainty, returning to a pace near the long-term trend.

US leads developed world upturn

Growth picked up across developed economies to the fastest in nearly 18 months in October, led by the US, which has posted the fastest growth among major economies during this period. Output rose at an increased rate across both manufacturing and services in the US, bringing the overall pace of expansion to the second-fastest this year.

The eurozone also reported a notable improvement, recording its strongest expansion since May 2023, driven by a marked upturn in the service sector and a sustained, albeit modest, increase in manufacturing output.

UK growth likewise accelerated, led by the service sector. The increase was boosted by the reopening of production at Jaguar Land Rover Automotive PLC and its supply chains after September's cyberattack, which helped manufacturing rebound.

Growth edged higher in Japan, with the strong performance in the service sector accompanied by a moderation in the manufacturing sector's decline. Meanwhile, Canada reported growth for the first time since November 2024 as the service sector rebounded and manufacturing nearly stabilized.

That left Australia as the only major developed economy to report a tempered performance in October, although its expansion remained solid compared to the past two years due to sustained service sector growth.

Sustained emerging market growth reported but Brazil's downturn persists

Emerging market growth slowed slightly in October but remained among the strongest seen over the past year, though performances were mixed.

India again led major emerging economies in terms of growth across goods and services, but its rate of expansion slowed to a five-month low as a softer service sector upturn offset improved manufacturing performance.

Mainland China continued to grow in October, recovering further from the brief contraction in May, though the pace of expansion slowed due to an export-led decline in manufacturing and a moderation in service sector growth.

In Brazil, output fell for a seventh straight month, although the rate of contraction eased after September’s sharpest decline in nearly three years.

Global business growth expectations relapse to near 3-year low

News on business optimism was less encouraging. Business expectations for the year ahead fell globally in October as companies continued to report uncertainty, particularly regarding US trade policy. Perceived economic growth risks remained elevated by historical standards, and sentiment declined globally in both manufacturing and services.

Business sentiment is now at the joint-lowest level in the past three years, excluding the slump in optimism in the immediate aftermath of April's US tariff announcements.

Expectations have fallen further below survey long-run averages in mainland China, the US, the eurozone and Japan. The UK is an exception, with business sentiment improving to meet its long-run average for the first time in a year. Only India and Spain reported sentiment above their respective long-run averages.

Gulf widens between current and expected output growth

The extent to which global output expectations for the year ahead have fallen below current output growth is unusual and points to elevated downside risks for the business outlook, including output growth and employment, though it is not unprecedented. The last time the global PMI survey saw such a wide gap between current and expected future output was in 2019, when US-China trade tensions escalated during the first Trump presidency. Moves toward trade agreements in late 2019 helped alleviate outlook concerns and stabilize growth, only for the COVID-19 pandemic to derail the recovery.

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

Data and insights for this article were compiled by Chris Williamson, chief business economist for S&P Global Market Intelligence.