Global manufacturing rebound gathers pace - UK is left behind as US, China and France improve/US manufacturing revives in August

Global manufacturing rebound gathers pace - UK is left behind as US, China and France improve
By Ralph Atkins in Frankfurt, Alan Rappeport in New York and Justine Lau in Hong Kong
Copyright The Financial Times Limited 2009
Published: September 1 2009 16:11 | Last updated: September 1 2009 16:11
http://www.ft.com/cms/s/0/b00e0644-9707-11de-83c5-00144feabdc0.html


The global rebound in manufacturing gathered pace in August, but some European countries, especially the UK, were left behind.

The US, China, Germany and France reported further strong improvements in manufacturing activity surveys, adding to evidence of a v-shaped recovery in economic growth in the third quarter.

The latest upbeat data could help calm financial markets’ fears about growth prospects once emergency measures by governments and central bank are withdrawn. Although rising unemployment and weakened banks remain threats to growth, the industrial sector’s renewed dynamism boosted hopes of self-sustaining growth.

“At the global level there is very strong evidence of a powerful upturn coming through, particularly in the new order components of these indices,” said Julian Callow, European economist at Barclays Capital.

However manufacturers themselves did not appear convinced the recovery was sustainable. ”Companies are spending on rebuilding stocks but not on capital equipment,” said Chris Williamson, chief economist at Markit, which produces the surveys outside the US.

US manufacturing activity grew for the first time in more than a year and a half in August, as bold government stimulus measures spurred a surge in new orders. The Institute of Supply Management said its August survey index rose from 48.9 to 52.9, beating economists’ expectations. It was the first time in 19 months that the index had exceeded 50, which marks the boundary between contracting and expanding activity.

US manufacturers said they were experiencing greater demand from car makers due to the cash-for-clunkers rebate programme and that the sudden surge in demand had caused a shortage in supply of raw steel.

“The growth appears sustainable in the short term, as inventories have been reduced for 40 consecutive months and supply chains will have to re-stock to meet this new demand,” said Norbert Ore, ISM chairman.

In the eurozone, revised French and German purchasing managers’ indices showed the fastest rates of improvement. France’s index rose from 48.1 in July to 50.8 in August – the first time it had indicated expanding activity since May last year. Germany’s index leapt from 45.7 in July to 49.2 last month.

Divergences emerged, however, across Europe with Italy and Spain seeing industrial activity contracting at a faster pace again – which economists said could have resulted from the impact of the strong euro on their exporters.

Beyond the eurozone, the UK’s CIPS/Markit purchasing managers’ index fell from 50.2 to 49.7 in August – pointing to a contraction in activity.

“Concerns will remain that the improvements seen in recent months may have been temporary rather than a sustainable recovery,” warned David Noble, chief executive at the Chartered Institute for Purchasing and Supply. He noted a “worrisome” slowdown in the UK rate of new order growth.

China has shown the clearest rebound so far this year. Its manufacturing purchasing managers’ index rose to 55.1 from 52.8 in July, pointing to a fifth consecutive month of expanding activity.

“China’s recovery is keeping up strong momentum,” said Qu Hongbin, chief China economist at HSBC. Fears that government curbs on bank lending could stall the recovery have led to high volatility in the Shanghai stock market.

Manufacturing activities also expanded in other Asian countries. In Taiwan, the HSBC PMI rose for the sixth successive month, from 53.8 in July to 55 in August. In South Korea, the index stood at 53.6 in August, the second-highest reading for 19 months, though down from 54 in July. Japan said this week that the seasonally adjusted Nomura/JMMA PMI rose from 50.4 in July to 53.6 in August, its highest level since November 2006.

Additional reporting by Norma Cohen in London



US manufacturing revives in August
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: September 1 2009 16:00 | Last updated: September 1 2009 16:00
http://www.ft.com/cms/s/0/90e21fa0-96f1-11de-9c24-00144feabdc0.html


US manufacturing activity grew for the first time in more than a year and a half in August as bold government stimulus measures spurred a surge in new orders.

Separately on Tuesday, pending home sales rose to the highest level in more than two years as buyers were lured back to the market by first-time buyer tax credits while US construction spending slipped in July.

The Institute of Supply Management said on Tuesday that its survey for August rose from 48.9 to 52.9, beating economists’ expectations. The index surpassed 50, which signals expanding activity, for the first time in 19 months.

Manufacturers said they were experiencing greater demand from car makers due to the cash-for-clunkers rebate programme and that the sudden surge in demand had caused a shortage in supply of raw steel.

Last month, 11 of the 18 industries surveyed reported growth, led by textiles, apparel and paper. New orders jumped by 9.6 percentage points, rising to the highest level since December 2004.

Analysts have been waiting to see if the signs of life in manufacturing are sustainable, which ultimately depends on a return of consumer demand.

“The growth appears sustainable in the short term, as inventories have been reduced for 40 consecutive months and supply chains will have to re-stock to meet this new demand,” said Norbert Ore, ISM chairman.

The expansion in US manufacturing is a good sign for the overall economy. Mr Ore noted that if the current level of activity is maintained, US gross domestic product would expand at an annual rate of 3.7 per cent.

Meanwhile, the National Association of Realtors said on Tuesday that pending home sales jumped by 12 per cent year-on-year in July and rose by 3.2 per cent from June. Lawrence Yun, NAR’s chief economist, pointed to record levels of home affordability and the impact of government tax incentives as reasons the housing market was stabilising.

Compared with last year, sales were up by 4.7 per cent in the northeast, 8.1 per cent in the midwest, 12 per cent in the south and 20 per cent in the west.

“Even with a good recovery taking place, the market is not yet back to normal,” said Charles McMillan, NAR president. “With a gradual absorption of inventory, we are on the cusp of a general stabilisation in home prices.”

Rising sales failed to generate gains in construction spending in July as federal spending on schools and highways declined during the month. However, spending ticked up for privately funded residential and commercial building.