China’s manufacturing expanded for a 13th month, business sentiment in Japan rose to the highest since 2008 and factories in Britain and the Euro region stepped up output as the global economic recovery strengthened.
The Purchasing Managers’ Index for China rose to a seasonally adjusted 55.1 in March from 52 the previous month, Hong Kong-based Li & Fung Group said today. In Japan, the Tankan index of sentiment jumped to minus 14 in March from minus 25 in December, while Europe’s manufacturing industry expanded at the fastest pace in more than three years. A gauge of UK manufacturing rose to a 15-year high.
Surging economic growth in China is pulling the global economy out of its worst slump in more than six decades and benefiting companies from Honeywell International Inc in the US to Germany’s Bayerische Motoren Werke AG. Stocks around the world rallied on today’s data. In the US, the world’s largest economy, manufacturing probably expanded last month at the fastest pace since 2005.
“It seems the epicenter of the global manufacturing cycle is in Asia,” said Ken Wattret, chief euro-area economist at BNP Paribas SA in London. “The sector is going strong, but what we see is a rebound from exceptional declines. The momentum is there, but we still have a long way to go.”
The MSCI Asia Pacific Index climbed 1 per cent to 126.40 in Tokyo today. The Stoxx Europe 600 increased 1.03 per cent to 266.28, an 18-month high, at 11:28 am in London, while futures on the Standard & Poor’s 500 Index rose 0.5 per cent.
The International Monetary Fund forecasts that the global economy will grow 3.9 per cent this year after a 0.8 per cent contraction in 2009 with China expanding 10 per cent, almost five times the pace expected for the US. The euro area economy may expand 1 per cent, the IMF forecast in January.
In China, the acceleration may buttress the case for Premier Wen Jiabao’s government to consider allowing gains in the yuan for the first time since mid-2008 and raising interest rates. Central bank Governor Zhou Xiaochuan said last month that “sooner or later” China will end the contingency measures it adopted during the global recession.
“There’s a very strong pick-up in global trade,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “It’s a cycle that started in Asia led by China that’s now filtering through to developed economies and Europe in particular.”
Manufacturing in Germany, Europe’s biggest economy, expanded at the fastest pace in 14 years, today’s data showed. In Switzerland, a measure of manufacturing activity jumped last month to the highest in more than three years, while Ireland’s manufacturing industry grew for the first time since 2007.
In the US, the Institute for Supply Management’s factory index, which will be released later today, probably rose to 57 in March from 56.5 in the prior month, according to a Bloomberg survey. Other reports may show fewer Americans filed claims for jobless benefits and construction dropped.
Honeywell, the Morris Township, New Jersey-based maker of controls for planes and buildings, this week raised its first- quarter profit forecast on stronger orders and cost controls. BMW, the world’s biggest maker of luxury vehicles, last month forecast 2010 deliveries to rise with Chinese sales projected to show a “strong double-digit” percentage gain.
“The expansion we’re seeing is largely an export story,” said David Tinsley, an economist at National Australia Bank in London. “So, even now you’ve got very robust rates of growth according to these PMI indices, it’s just covering some of the level lost. It’s not forging a new growth trajectory.”
