The recent dynamics of the PMI (Purchasing Managers' Index) indicators compiled by Markit Economics point to an acceleration in the global economy in August. We believe this was driven by low borrowing costs and a positive backdrop in real estate and financial markets.

Accordingly, the manufacturing PMI rose by 0.4 points m/m to 53.1 in August (the highest since 2011). Improvements in new export orders, employment, output and prices point to the post-crisis global manufacturing cycle continuing in the near term.

Manufacturing in the Eurozone stands out, supported by stronger domestic demand amid the European Central Bank’s unprecedentedly accommodative monetary policy.

The services PMI also increased by 0.4 points m/m to 54.1 in August (the highest since August 2015), supported by the rollout of new services and a strengthening positive tone in the labor market.

From a regional perspective, services accelerated in the United States, China, Germany, Russia and Ireland. By contrast, services declined in India and Brazil last month.

As a result, the Composite PMI (manufacturing and services) posted a 0.3-point m/m increase to 53.9 (the highest since April 2015). The momentum in new orders suggests the post-crisis economic cycle has further room to run in the near term.

In BT’s baseline macroeconomic scenario, we expect the global economy to slow from the second half of next year, as financing costs rise and the post-crisis cycle matures.

We see the risks to the global outlook over the coming quarters as: developments in global financial markets; geopolitical tensions; and the policy mix in the US, China and the Eurozone.