Manufacturers see positive start to year
The world’s leading manufacturing nations started the year with tentative steps towards recovery, according to data showing the global economy recapturing some optimism but with dark clouds persisting over the troubled southern members of the eurozone.
Asia’s biggest economies led the way. In China, the official purchasing managers’ index, an important gauge of factory growth, rose to 50.5 in January from 50.3 a month earlier. In remaining above 50, the index indicated an expansion in industrial activity, confounding forecasts for a decline.
India’s manufacturing sector grew at its fastest pace in eight months, according to the latest HSBC manufacturing PMI survey, compiled by Markit, a closely watched barometer of manufacturing output, demand, prices and employment.
While the eurozone index remained below 50, indicating that business conditions had worsened for a sixth straight month, it rose from to 48.8 from 46.9 in December. Output rose but new orders continued their decline.
Chris Williamson, chief economist at Markit said: “Euro area manufacturing has started 2012 surprisingly well, suggesting the region may avoid a slide back into recession.”
The survey broadly mirrored Monday’s unemployment figures, which highlighted the growing gap between the fortunes of Germany and other northern European economies and those of many of their fellow members of the 17-country eurozone.
Germany’s PMI recorded a six-month high of 51, while Greece, which has imposed swingeing spending cuts in a race to avoid the first developed country in 60 years to default on its debts, saw its factory output sub-index fall at the fastest rate since the first Greek survey in 1999, to 37.4 from 39.3 in December. Greece’s overall PMI reading has been positive for only one month since October 2008.
Italy and Spain, the two largest eurozone economies to have become embroiled in the debt crisis, both saw improvement but remained well below positive territory. The French PMI fell.
“All in all, whether growth will be positive in [the first quarter] remains highly uncertain, but we can assert with relatively more certainty that the worst may be behind us,” wrote analysts at Barclays Capital.
The euro erased early losses after the data were released to trade at at $1.3113, up 0.2 per cent.
Monday’s European Union summit, at which 25 of the bloc’s 27 members agreed a treaty to enshrine tough new fiscal rules, ignited a debate about whether austerity policies are choking off economic recovery.
Leading European manufacturers including Siemens and Philips have blamed sagging demand in Europe for recent poor results.
Ewald Nowotny, a member of the European Central Bank’s council, warned on Monday: “We could have stagnation in the euro region as a whole or recession in certain phases.”
Outside the euro areas, a rise in the UK’s headline PMI to 52.1 from 49.7 in December showed Britain’s manufacturing in better health than many economists had expected.
Falling European demand was reflected in a dip in China’s sub-index measuring export deals. However, factories noted an increase in their domestic business, as the world’s second-largest economy remained robust despite the government’s sustained campaign to cool the property sector.
“The Chinese economy has gradually stabilised. The rise in new orders and raw material inventories reflects a recovery for industrial companies,” said Zhang Liqun, an analyst with the China Federation of Logistics and Purchasing.
But economists also cautioned against over-interpreting the data because of seasonal distortions. With the Chinese New Year in the final week of January, many factories were closed or running at half-speed for the latter half of the month, and significant adjustments to the data were needed to produce the final PMI figure.
Japanese output rose for the first time in three months, albeit slowly.
In the latest sign that Asia’s third-largest economy is recovery from its 2011 slowdown, India’s PMI rose to 57.5 from 54.2 in December. Factory output surged the most on record, driven increased domestic and foreign demand.
The rise follows December’s decision by India’s central bank to end aggressive monetary tightening and a raft of positive economic data.
However, some analysts warned that the strong PMI numbers failed to reflect the broader state of the economy.
“The PMI numbers are extremely robust but they don’t tell the whole story,” said Shubhada Roa, chief economist at Yes Bank. “Consumption growth has improved, that’s clear, but unfortunately investment remains laggardly.”