Recession... what recession?

Buoyant manufacturing figures from the UK, the US and China boost hopes for global recovery

Factories continued to fire back to life last month, with manufacturing in the UK, the US and China rebounding more strongly than economists had expected.

In the UK, the manufacturing sector kicked off the fourth quarter on a high note, with October export orders rising sharply to a five-month high after a slowdown in September.

The closely-watched purchasing managers’ index (PMI) from Markit rose to 54.9, compared to a 10-month low of 53.4 in September. Economists had been expecting a figure of 53.1.

This is the fifteenth month in a row that the PMI has been above the all-important 50 mark, which indicates expansion rather than contraction.

The more forward-looking aspects of the index suggested the rebound is no flash-in-the-pan, with new order growth improving for a second month in a row.

Manufacturers also employed new workers at the fastest rate since June, indicating they are more confident about the future, and fuelling hopes that the private sector will be able to compensate for public sector job losses.

Economists said the robust figures, which come hot-on-the-heels of strong third-quarter GDP growth of 0.8 per cent, were the “final nail in the coffin” for another round of quantitative easing (QE), at least in the short term.

“If last week’s GDP data was not enough to head off the possibility of the Bank of England implementing further QE at this week’s meeting, then these figures will surely be the final nail in the coffin,” said Andrew Goodwin, senior economic advisor to the Ernst & Young Item club.

Meanwhile, stocks across the globe ticked up after Chinese and US manufacturing data provided investors food-for-thought ahead of the Fed’s decision on more QE, due tomorrow.

The US Institute for Supply Management’s October PMI rose to 56.8 from 54.4 a month earlier, confounding economists who had expected it to slip further to 54. The all-important employment component of the index bounced higher, as did the part that measures new orders.

Earlier, news from China’s factories provided cause for hope. There, the official PMI rose to 54.7 against 53.8 in September, while the HSBC index rocketed from 52.9 to 54.8 – one of the sharpest rises since the bank began the survey.

In London, the FTSE 100 closed up 0.3 per cent at 5,695.62. Across the pond in New York, the Dow Jones closed up by 0.6 per cent, after earlier gains were tempered by fears over the decision on QE.