World manufacturing ends 2013 on a strong note

World manufacturing ends 2013 on a strong note

LONDON/BEIJING - Global manufacturing ended 2013 on a strong note as major exporters like Japan, Germany and Italy posted their fastest growth in years, although China's performance remained modest, surveys showed on Thursday.

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.

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 being 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 Euro zone manufacturing PMI rose to 52.7 in December from 51.6 in November, above the 50 threshold for growth.

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. Factory activity expanded slightly in Spain. Irish manufacturing clocked a seventh month of growth. Even Greek manufacturing activity grew.

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.

Weak euro zone inflation, at just 0.9 per cent in November, has worried policymakers at the European Central Bank. The latest PMIs suggest disinflation among manufacturers, at least, may be ending.

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

The mood in the euro zone was further boosted last month with news Ireland emerged from its international bailout, while posting fast economic growth in the third quarter.

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 per cent in the fourth quarter alone, according to Markit.

A similar report from the US is expected at 1358 GMT, followed by the more closely watched Institute for Supply Management PMI at 1500 GMT. A Reuters poll of economists predicted a slight dip to 57.0 in December from 57.3.

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