World factory output shows clear growth

THERE was little sign yesterday of a slowdown in the strong global manufacturing recovery, as leading surveys continued to forecast an expansion in factory activity in May in the US, the UK and the Eurozone.

In Britain, the Markit/CIPS manufacturing purchasing managers’ index (PMI) remained at April’s record high of 60.7, which was the strongest growth since June 1994 and well above the 50 level that separates growth from contraction.

Companies cited solid growth in incoming new orders as the principal factor and Societe Generale UK economist Brian Hilliard said the strong report reaffirmed his view that further strong gains in manufacturing output have been made during the current quarter.

Across the Atlantic, the US ISM manufacturing survey was also impressive. Although it was lower than April’s six-year high of 60.4, at 59.7 it was stronger than expected and marked its tenth consecutive month of expansion.

Encouragingly, the employment balance – which tends to lag other parts of the survey – rose from 58.5 to 59.8, its strongest reading for six years. Ian Harwood, chief economist at Evolution Securities, said this augured well for this Friday’s non-farm payrolls report. New orders also remained at April’s 65.7, which is a historically high level.

The Markit purchasing managers’ index for the Eurozone also signalled an expansion in factory activity in May despite at 55.8 being slightly down on the flash estimate of 55.9.

However, the sharp fall in the PMI from April’s near four-year high of 57.6 highlighted the growing fragility of the recovery, said Markit. Chris Williamson, its chief economist, said: “The May PMIs highlight the speed with which uncertainty surrounding the sovereign debt crisis appears to have hit business activity.”

May saw the second-steepest slowdown in the rate of expansion of output since the survey started in 1997 and a markedly slower rate of growth of new orders. In spite of a sharp slowdown in Germany, growth was still the strongest of the four biggest Eurozone economies. Greece, meanwhile, was the only Eurozone country to see an ongoing manufacturing recession.