Activity in the US manufacturing sector expanded at a healthy pace in March, while factories are facing rising raw-material costs that could lift broader inflation.
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That helped to offset solid, albeit slower growth, in the US, Japan, UK, Russia and China, and continued contractions in South Korea and Brazil.
Economic growth for the October-December quarter came in at 7.0 per cent, a bit slower than the 7.4 per cent in the previous quarter but much faster than the 6.4 per cent expansion forecast by economists in a Reuters poll, many of whom had expected a sharper hit from the cash crunch.
The US manufacturing PMI will be released at 2.45pm BST, while New York Fed President William Dudley, Philadelphia Fed President Patrick Harker and Richmond Fed President Jeffrey Lacker will all address the state of the economy when they speak at separate events throughout the day.
Manufacturing output slipped to its weakest pace of growth in eight months in March, following a slowdown in consumer goods production. The last time that happened was nearly three years ago.
“All the pieces of the puzzle seem to be in place to engender growth, such as more new orders coming through, increasing output, exports increasing and growth in employment”.
“Asia’s economic backdrop remains solid with most countries remaining above the key threshold level of expansion, though USA trade protectionism fears is the biggest uncertainty for now”, said Aidan Yao, an economist at AXA Investment Managers.
Bolstering expectations of increasing resilience in the global economy, data last week showed USA inflation rising at its fastest pace in five years despite some sluggishness in consumer spending.
Separately, another survey of manufacturers in the region also showed operating conditions improving.
It was the highest reading for prices since May 2011, and 16 of the 18 industries surveyed reported paying higher prices for raw materials, or 47 per cent, while only six per cent reported lower prices. USA stocks were trading marginally lower.
“This extended the trend of concurrent growth that has been ongoing since the final quarter of 2012”, said IHS Markit. Commercial construction also picked up.
The Markit/CIPS purchasing managers’ index for the manufacturing sector dropped to 54.2 in March from 54.5 in February, which was revised down from 54.6.
The New Orders Index registered 64.5%, a decrease of 0.6 of a percentage point from the February reading of 65.1%.
“This downbeat effect took a small bite out of any strong rises in employment levels, as the increase in staff hiring was at a three-month low”.
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This finding also mirrors the most recent NAM Manufacturers’ Outlook Survey, which found confidence rising to its highest point in the survey’s almost 20-year history.
