January 2, 2014 / 12:17 PM / 5 years ago

World manufacturing ends 2013 on a strong note

NEW YORK/LONDON/BEIJING (Reuters) - Global manufacturing ended 2013 on a strong note, as major exporters like the United States, Japan and Germany all saw demand pick up, although China’s performance remained modest, surveys showed on Thursday.

A worker cuts a metal at a sheet metal processing company Yamada Manufacturing in Daito, Osaka prefecture, December 10, 2013. REUTERS/Yoko Kubota

Years of loose monetary policy, along with soaring stock markets, appear to be bolstering economic confidence. That bodes well for a global economy that has struggled to shake off the effects of financial crisis and recession.

China’s growth rate fell to a three-month low, though the index was still above the 50 mark that indicates expansion. Weakness in global equity markets was blamed in part on the Chinese data, though markets were also taking a breather from recent gains.

U.S. manufacturing activity grew in December at its swiftest pace in 11 months and the rate of job growth was the strongest since March, according to Markit’s Purchasing Managers’ Index.

Other U.S. economic figures, including construction spending and the Institute for Supply Management’s purchasing managers’ survey, also pointed to steady gains in the world’s largest economy.

“We have had a whole string of strong ISM numbers. This is a gauge of sentiment and sentiment is improving,” said Scott Brown, chief economist with Raymond James in St. Petersburg, Florida.

“Europe has turned the corner. It’s not contracting at least. The emerging markets are doing better. We are looking for growth to pick up once again in the new year and we have few headwinds to deal with, especially less fiscal drag.”

The U.S. Institute for Supply Management’s manufacturing PMI index dipped slightly to 57 from 57.3 in November, but that’s still well above the 50 level that indicates growth in the sector. Construction spending rose 1 percent to a four-and-a-half-year high.

A Reuters poll of economists taken in mid-December forecasts annualized first-quarter economic growth of 2.5 percent, reaching 3 percent by year-end. Since then, economic data has tended to exceed forecasts.

U.S. stock markets have been on a tear, even as the U.S. Federal Reserve eases off on its monthly stimulus. The S&P 500 benchmark closed at all-time highs on Tuesday, even though equities dipped modestly on Thursday.

Factory sentiment hit a 10-month high in Mexico, with the HSBC Mexico Manufacturing PMI rising to 52.6 in December, thanks to improved new orders and output.

Euro zone manufacturing grew at the fastest rate since mid- 2011 in December on brisk business in Germany and Italy, Markit Purchasing Managers’ Indexes (PMIs) showed. Add in the fastest growth in 7 1/2 years for Japanese manufacturing and no major slowdown in Chinese manufacturing output, and the stage is set for a solid start to the year.

“Looking ahead, the hope for the euro zone is that recent improved confidence will encourage businesses to lift their employment and investment plans as 2014 progresses, and will also encourage consumers to spend more,” said Howard Archer, the chief European and UK economist at IHS Global Insight.

Markit’s U.S. manufacturing index rose to 55 in December from a final reading of 54.7 in November, above the 50 threshold that indicates growth.

Markit’s euro zone manufacturing PMI rose to 52.7 in December from 51.6 in November.

While business is showing signs of life, unemployment in many euro zone countries, particularly among young people, remains high. However, the PMIs showed almost two years of job cuts across euro zone factories nearly ended last month.

Manufacturing appears to reviving in several euro zone countries that have struggled since the sovereign debt crisis broke out more than four years ago, with gains in Spain, Ireland and even Greece.

In Germany, Europe’s biggest economy, manufacturing grew at its fastest pace since mid-2011, with its PMI rising to 54.3 from 52.7. The Dutch posted their fastest rate in more than two years.

But the euro zone’s No. 2 economy, France, is still lagging. Its PMI fell sharply to 47.0 from 48.4, a seven-month low, marking faster contraction as the year drew to a close.

Chris Williamson, the chief economist at Markit, noted that euro zone manufacturers have begun raising prices, suggesting some strengthening in almost non-existent pricing power.

“It seems likely that the manufacturing sector will help drive a meaningful, albeit still modest, recovery in the wider economy,” Williamson said.

In Britain, which in the last several months has been outperforming the euro economies, the manufacturing PMI unexpectedly slipped to 57.3 from 58.1. Even so, manufacturing output probably grew by 1 percent in the fourth quarter alone, according to Markit.


In Asia, performance was a bit more mixed. Already lackluster output slowed in India, owing mainly to weak domestic demand. But orders from abroad picked up.

“The most striking feature of today’s PMIs was the rise in the output component recorded everywhere but India,” wrote Krystal Tan, Asia economist at consultancy Capital Economics.

The HSBC/Markit PMI for China slipped to a three-month low of 50.5 in December, consistent with a dip in the official government PMI to a four-month low of 51.0.

Capital Economics’ Tan noted that new orders growth in Asia, while not as strong as output, was better for most economies than it was just a few months ago.

“This fits with our view that the region’s manufacturing sectors are on a gradual road to recovery, supported by loose monetary policy and strengthening external demand.”

The PMIs for South Korea and Indonesia, important emerging economies in Asia, both rose in December but remained at relatively low levels.

(This story corrects construction spending rise in paragraph eight)

Writing by David Gaffen and Ross Finley; Additional reporting by Richard Leong in NEW YORK, Jonathan Standing in BEIJING, Faith Hung in TAIPEI, Rieka Rahadiana in JAKARTA, Yati Himatsingka in BANGALORE; Andy Bruce in LONDON; Editing by Larry King and Chizu Nomiyama

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