Outlook more positive for 2014
Bucking fears of a sharp brake on growth after the government shutdown in the US and earlier signs of distress in Europe and Asia, global manufacturing activity sped up in November, raising hopes for a broader global economic turnaround in the year ahead.
In the US, figures released on Monday showed factories operating at the most robust pace since the spring of 2011, and well above the level economists had expected for the month. Separate surveys out on Monday in Europe and China also offered encouraging signs in a sector often considered a bellwether for the global economy.
Experts attributed the rebound in the US to demand from a recovering construction sector, as well as rising exports. Overseas, German factories helped push manufacturing in Europe forward, while China also showed unexpected strength.
"The news is a bit more encouraging when you look at advanced economies," said Tal Shapsa, an international economist with Barclays. "The recovery is gradual and isn't spectacular, but in an environment of fiscal headwinds, it looks good."
That caution in the face of the better data extended to Wall Street, where stocks fell slightly on Monday after rising more than 2 per cent in the past month. For the year, the S&P500 index is up more than 26 per cent, reflecting a view in the markets that business remains on the upswing for large companies despite a series of blows from government cutbacks around the world.
If the recovery in the manufacturing sector reaches into the labour market and hiring picks up in the US, it could encourage the Federal Reserve to begin easing back on its stimulus efforts later this month or early next year. After expectations the central bank would begin this tapering earlier, policymakers wavered amid softer data and waited for more signals of stronger growth before cutting back on monthly bond purchases aimed at keeping interest rates low and encouraging employment.
A stronger clue about the Fed's course of action will come on Friday, when the Labour Department reports on job creation and unemployment for November. The data for October was significantly better than expected, despite the government shutdown, and the consensus among economists is the economy may have created about 180,000 new jobs in November, while the unemployment rate fell to 7.1 per cent from 7.3 per cent in October.
Besides the healthier factory output data on Monday, a separate survey by the government showed that overall construction spending rose 0.8 percentage point in October, which was also better than expected. Much of the gain was due to a surge in government-funded construction.
Ryan Wang, an economist with HSBC, said: "The recovery in the housing sector has extensive spillover into other parts of the economy, like lumber, furniture and even automobiles.
"When people buy a new home they often buy a new car, and in a nutshell autos and housing are the bright spots for the US economy."
In Europe, the purchasing managers' index, compiled by the research firm Markit, rose to 51.6, the best reading since June 2011, and the fifth month in a row that it was above 50, signalling growth rather than contraction. But conditions varied widely around the Continent, with Germany barrelling ahead while France and Spain showed much weaker results.
In China, the HSBC/Markit PMI also suggested stable growth, despite fears that the world's second-largest economy might have been cooling off too quickly after the expansion that has prevailed in recent years.
One explanation, economists said, is that Japan, a major source of demand for Chinese manufacturers, is performing better in the wake of aggressive economic stimulus efforts by the Bank of Japan.