Manufacturing figures give signs of global recovery
The global downturn appeared close to a bottom on Wednesday after manufacturing figures from across the world suggested the worldwide recession was running out of steam in all big economies.
The welcome news comes after nine months of the sharpest contraction in global manufacturing output since the second world war and a dramatic plunge in world trade as buyers of capital goods and consumer durables effectively went on strike.
Stuart Green, global economist with HSBC, said the signs from around the world indicated that “a spell in the financial wilderness now looks less likely for the major economies . . . with a slowly improving cyclical picture factored in for the rest of 2009 and 2010 across many regions”.
But he and policymakers around the world fear that the coming upturn will be neither durable nor strong.
The recovery in global manufacturing has come primarily because companies have sold off much of their accumulated stocks and are re-starting mothballed production lines. Once this temporary boost is completed, serious questions remain about the source of longer-term demand to maintain the current momentum.
The June data on Wednesday came from a series of surveys of purchasing managers in the manufacturing sector, the area of the global economy hardest hit by the recession. Although the headline figures were positive only in China, the manufacturing output element of the data was positive in the US, the UK and Japan as well.
The speed of contraction in continental European economies has also decreased substantially since the start of the year, when pessimism was at its height, registering the most positive signs from industry in the past 10 months.
Chris Williamson, the chief economist of Markit economics, said: “The global manufacturing economy is being led out of recession by China, which registered a third consecutive monthly rise in output and the largest increase for a year.”
Although companies expect to shed further jobs this year, the surveys of manufacturers also suggest that employers have become less gloomy about the need to lay off staff.
Nick Verdi of Barclays Capital said the figures indicated companies were becoming much more comfortable with their order books. “Our global new orders-inventories indicator continues to point to positive manufacturing output,” he said.
But for all the better news on global output, caution about the durability of any upturn is likely to persuade policymakers to keep interest rates at historically low levels.