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Global Economy Shrinks for Second Month: JPMorgan

The global economy contracted for the second month in a row in July as output declined in both manufacturing and services companies hit by slower demand and high energy costs, a survey suggested on Tuesday.

The Global Total Output index, produced by JPMorgan with research and supply management organizations, fell to 49.0 in July from 49.4 in June, below the 50.0 mark that separates growth and contraction.

This was the first time since early 2003 that the index has posted two consecutive numbers below the 50.0 mark.

Meanwhile, the Global Services index eased to 48.9 in July from 49.3 in June as new business fell to its lowest point in seven years.

Earlier the U.S. ISM index beat expectations, jumping back to 49.5 from 48.2 in June, beating the 48.5 forecast by economists. But that still showed the service sector in contraction for the second month in a row.

On a global scale, weaker growth again contrasted with stubbornly high inflation. The input prices index covering the manufacturing and services sectors eased to 76.4, but still remains close to the survey high of 78.2 hit in June.

"Recent PMI data indicate that the global economy has downshifted considerably at mid-year," said David Hensley at JP Morgan in a statement.

The index combines survey data from countries including the United States, Japan, Germany, France, Britain, China and Russia.