Global economic activity has slowed

Sources: Bloomberg and Wells Fargo Investment Institute. Monthly data from July 1, 2019 to September 30, 2022. PMI = Purchasing Managers’ Index. U.S. Composite Purchasing Managers’ Index level is the Institute for Supply Management Composite Index®, which is a composite index based on the diffusion Indexes of five of the Indexes with equal weights: new orders, production, employment, supplier deliveries, and inventories. Eurozone and China PMI levels use the Markit Manufacturing PMI Index, which is an index developed from monthly business surveys used to monitor the condition of industries and businesses. An index value over 50 indicates expansion; below 50 indicates contraction. The values for the index can be between 0 and 100.

Key Takeaways

  • The U.S. and Europe are in a foot race to a recession that we expect to be deeper overseas, due to Europe’s greater exposure to energy and to other supply disruptions tied to the war in Ukraine.
  • Global manufacturing likely will be on the leading edge of the recession in advanced economies because of its greater exposure to energy and other supply disruptions, COVID-related shutdowns in China, and to a more general slowing of global trade and spending tied to elevated inflation and interest rates.