Friday, 01 February 2013

Manufacturing: China slowing, eurozone growing?

It's a bit of a surprising juxtaposition, but China has reported a small slowdown in its manufacturing sector, whilst eurozone manufacturing is apparently set for a return to growth.

China’s Purchasing Managers’ Index (PMI), which surveys a series of large firms, fell to 50.4 in January, but anything over 50 is normally considered to indicate growth, so the party is not over yet. It is slightly disappointing considering the figure was 50. in December, however.

But HSBC said that its own PMI for China, which looks at smaller outfits instead of the giant firms, climbed to 52.3 in January, up from 51.5 in December. This could indicate that the country’s trade balance (how much it exports vs. how much it imports) might have tipped slightly back towards the domestic market, as small firms are less likely to be exporting en masse.

Still, at least the figures from both measures remain in the ‘growth zone’. We could really do without any serious economic contractions from China at the moment. 

Meanwhile, closer to home, a glint of light on the otherwise black hole that is Europe. The contraction in eurozone manufacturing that has been going on for the last few months slowed down in January, and the Markit PMI figures suggest that a return to growth could be on the horizon.

The PMI rose to 47.9 from 46.1 in December. The figure still means that the manufacturing sector contracted during the period, but obviously if climbs such as this continue for a few months, we’ll be back in the black where growth is concerned.

Chief economist at Markit Chris Williamson said: ‘The improvement was led by Germany, which saw the strongest gain in output of all eurozone states, but rising exports are also helping to revive the manufacturing sectors of other countries, most notably Spain and Italy. Provided there are no further setbacks to the region’s debt crisis, these data add to the expectation that the eurozone is on course to return to growth by mid-2013.’

After such a long period of gloom (the PMI in Europe has been below 50 since August 2011), a sputtering back to life for manufacturing would be more than welcome…

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