January 2011 Manufacturing PMIs: Global expansion shifting gears!

By Prieur du Plessis, on February 3rd, 2011 posted in: Economy

The manufacturing PMIs for January indicate that globally growth in the factory sector is robust. My GDP-weighted PMI for the major economies jumped to 57.2 compared to 54.9 in December – the highest since April last year and the fifth consecutive month of gains. The U.S. was particularly strong, with the PMI rising to 60.8 in January from 58.5 in December – the highest since May 2004 when it reached 61.4. Other countries that reported materially stronger growth were Ireland, the U.K., Taiwan and South Africa. Only France and China reported materially weaker growth, while the manufacturing sector in Japan is at long last expanding again. The weakness in Australia’s factory sector is abating but Greece is sinking further.

In the Eurozone the manufacturing sectors in Germany continue to be robust, while Ireland and Italy continue to surprise on the upside. The manufacturing sector in the U.K. accelerated to a robust 62.0.

In Asia, Japan’s PMI improved slightly but the manufacturing sector remains in the grip of a recession. Among the Asian tigers growth at the factory levels in India accelerated again, but that of China has moderated somewhat due to seasonal factors alluded to in my blog yesterday. Growth in Emerging Europe continues be robust.

	Manufacturing PMI		Trend
Country	Jan-11	Dec-10	Trend
U.S.*****	*60.8*	*57.0*	Expansion accelerated, robust
Eurozone*	*57.3*	*57.1*	Expansion accelerated, robust
Germany*	60.5	60.7	Expansion accelerated, robust
France*	54.9	57.2	Softened a tad, robust expansion
Greece*	42.8	43.1	Contraction intensified
Italy*	56.6	54.7	Expansion accelerated
Spain*	52.0	51.5	Expansion accelerated
Ireland*	55.8	52.2	Expansion accelerated
U.K.*	*62.0*	*58.3*	Expansion accelerated, robust
Japan*	*51.4*	*48.3*	Expanding again
Australia*	*46.7*	*46.3*	Contraction moderated
*Emerging Economies*
Brazil*	53.1	52.4	Expansion accelerated
China**	52.9	53.9	Expansion slowed
Czech*	60.5	58.4	Expansion accelerated, robust
Poland*	55.6	56.3	Softened a tad, robust expansion
Turkey*	57.2	56.4	Robust
India*	56.8	56.7	Robust expansion
Russia*	53.5	53.5	Continued to expand
Taiwan*	54.7	51.7	Expansion accelerated
RSA***	54.6	51.7	Expansion accelerated
S Korea	53.5	53.9	Expansion decelerated somewhat
Global****	*57.2*	*54.9*	Expansion accelerated, robust

Sources: Markit*; Li & Fung**; Plexus Asset Management****; ISM*****.

It is apparent that the global manufacturing sector has found a firm footing and that the upward trend is likely to be maintained in coming months.

Sources: Markit; Li & Fung; Plexus Asset Management; ISM.

Growth in global industrial production on a year-ago basis is likely to gain momentum through the second quarter of this year.

Sources: Markit*; Li & Fung**; Plexus Asset Management****; ISM*****; I-Net Bridge.

Industrial metal prices will continue to be strongly supported by the acceleration of the global manufacturing sector.

Sources: Markit*; Li & Fung**; Plexus Asset Management****; ISM*****; I-Net Bridge.

The numbers again surprised me on the upside. I continue to fret about how things will pan out in China given the stricter monetary policies of the PBoC, the potential contagion of the debt crisis in the Eurozone and the other black swan that has suddenly appeared on the radar – the geo-political situation and especially Egypt. I do feel a bit more relaxed about the global economy, though. The non-manufacturing PMIs to be published on Wednesday and Thursday are likely to paint similar positive pictures.

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