Global manufacturing fuels recovery

Global manufacturing fuels recovery
By Alan Rappeport in Washington
Copyright The Financial Times Limited 2010
Published: April 1 2010 15:54 | Last updated: April 1 2010 15:54
http://www.ft.com/cms/s/0/79325624-3d9d-11df-bdbb-00144feabdc0.html


The world’s factories are fuelling the global economic recovery, with new figures showing that manufacturing output in the US, China and Europe is growing at a record rate.

In the US, Institute of Supply Management data revealed that factory output grew for the eighth month running in March, accelerating at its fastest pace since July 2004.

ISM’s closely watched index climbed from 56.5 in February to 59.6 last month, beating economists’ predictions, and was boosted by a surprise rise in inventories, which have been falling for the last four years. Readings above 50 signal expansion.

Employment and new orders also showed signs of growth with some markets seeing customers orders soaring by as much as 50 per cent. Norbert Ore, ISM chairman, said that manufacturers are ramping up inventories based on expectations of greater economic activity.

“At just below 60, the index is consistent with very strong GDP growth of slightly more than 5 per cent at an annualised pace,” said Paul Ashworth, senior US economist at Capital Economics. “Overall, the export-orientated factory sector is evidently enjoying the benefits of the rebound in world trade, whereas other sectors more dependent on domestic sales are still struggling.”

In China, manufacturing activity has also surged, expanding at a record pace in the first three months of the year thanks to a rebound in global demand and domestic consumption. Chinese activity rose to 57 in March from 55.8 in February, according to the latest purchasing managers’ data released on Thursday.

However, some neighbouring Asian countries are struggling to keep up with China’s manufacturing strength. South Korea, India and Australia are still seeing monthly declines in factory output. But Taiwan and Japan experienced greater factory output thanks to growing demand from China and from countries in southeast Asia.

In Europe, the UK saw benefits from an export-led rise in factory activity that pushed manufacturing output to its fastest pace since 1994. Meanwhile, France and Germany led the eurozone to its strongest manufacturing output in almost four years.