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 Years of loose monetary policy, along with soaring stock markets,
appear to be bolstering economic confidence. That bodes well for a
global economy that has struggled to shake off the effects of
financial crisis and recession.
China's growth rate fell to a three-month low, though the index was
still above the 50 mark that indicates expansion. Weakness in global
equity markets was blamed in part on the Chinese data, though
markets were also taking a breather from recent gains.
U.S. manufacturing activity grew in December at its swiftest pace in
11 months and the rate of job growth was the strongest since March,
according to Markit's Purchasing Managers' Index.
Other U.S. economic figures, including construction spending and the
Institute for Supply Management's purchasing managers' survey, also
pointed to steady gains in the world's largest economy.
"We have had a whole string of strong ISM numbers. This is a gauge
of sentiment and sentiment is improving," said Scott Brown, chief
economist with Raymond James in St. Petersburg, Florida.
"Europe has turned the corner. It's not contracting at least. The
emerging markets are doing better. We are looking for growth to pick
up once again in the new year and we have few headwinds to deal
with, especially less fiscal drag."
The U.S. Institute for Supply Management's manufacturing PMI index
dipped slightly to 57 from 57.3 in November, but that's still well
above the 50 level that indicates growth in the sector. Construction
spending rose 1 percent to a four-and-a-half-year high.
A Reuters poll of economists taken in mid-December forecasts
annualized first-quarter economic growth of 2.5 percent, reaching 3
percent by year-end. Since then, economic data has tended to exceed
forecasts.
U.S. stock markets have been on a tear, even as the U.S. Federal
Reserve eases off on its monthly stimulus. The S&P 500 benchmark
closed at all-time highs on Tuesday, even though equities dipped
modestly on Thursday.
Factory sentiment hit a 10-month high in Mexico, with the HSBC
Mexico Manufacturing PMI rising to 52.6 in December, thanks to
improved new orders and output.
Euro zone manufacturing grew at the fastest rate since mid- 2011 in
December on brisk business in Germany and Italy, Markit Purchasing
Managers' Indexes (PMIs) showed. Add in the fastest growth in 7 1/2
years for Japanese manufacturing and no major slowdown in Chinese
manufacturing output, and the stage is set for a solid start to the
year.
"Looking ahead, the hope for the euro zone is that recent improved
confidence will encourage businesses to lift their employment and
investment plans as 2014 progresses, and will also encourage
consumers to spend more," said Howard Archer, the chief European and
UK economist at IHS Global Insight.
Markit's U.S. manufacturing index rose to 55 in December from a
final reading of 54.7 in November, above the 50 threshold that
indicates growth.
Markit's euro zone manufacturing PMI rose to 52.7 in December from
51.6 in November.
While business is showing signs of life, unemployment in many euro
zone countries, particularly among young people, remains high.
However, the PMIs showed almost two years of job cuts across euro
zone factories nearly ended last month.
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Manufacturing appears to reviving in several euro zone countries
that have struggled since the sovereign debt crisis broke out more
than four years ago, with gains in Spain, Ireland and even Greece.
In Germany, Europe's biggest economy, manufacturing grew at its
fastest pace since mid-2011, with its PMI rising to 54.3 from 52.7.
The Dutch posted their fastest rate in more than two years.
But the euro zone's No. 2 economy, France, is still lagging. Its PMI
fell sharply to 47.0 from 48.4, a seven-month low, marking faster
contraction as the year drew to a close.
Chris Williamson, the chief economist at Markit, noted that euro
zone manufacturers have begun raising prices, suggesting some
strengthening in almost non-existent pricing power.
"It seems likely that the manufacturing sector will help drive a
meaningful, albeit still modest, recovery in the wider economy,"
Williamson said.
In Britain, which in the last several months has been outperforming
the euro economies, the manufacturing PMI unexpectedly slipped to
57.3 from 58.1. Even so, manufacturing output probably grew by 1
percent in the fourth quarter alone, according to Markit.
ASIAN OUTPUT RISING
In Asia, performance was a bit more mixed. Already lackluster output
slowed in India, owing mainly to weak domestic demand. But orders
from abroad picked up.
"The most striking feature of today's PMIs was the rise in the
output component recorded everywhere but India," wrote Krystal Tan,
Asia economist at consultancy Capital Economics.
The HSBC/Markit PMI for China slipped to a three-month low of 50.5
in December, consistent with a dip in the official government PMI to
a four-month low of 51.0.
Capital Economics' Tan noted that new orders growth in Asia, while
not as strong as output, was better for most economies than it was
just a few months ago.
"This fits with our view that the region's manufacturing sectors are
on a gradual road to recovery, supported by loose monetary policy
and strengthening external demand."
The PMIs for South Korea and Indonesia, important emerging economies
in Asia, both rose in December but remained at relatively low
levels.
(Writing by David Gaffen and Ross
Finley; additional reporting by Richard Leong in New York, Jonathan
Standing in Beijing, Faith Hung in Taipei, Rieka Rahadiana in
Jakarta, Yati Himatsingka in Bangalore; Andy Bruce in London;
editing by Larry King and Chizu Nomiyama)
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