According to PMI report, output growth rebounded at start of the quarter and Employment rose at fastest pace in three months.
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The result was considerably better than had been expected, showing the highest reading since June 2014 and one of the fastest rises since the survey began.
He adds the most concerning issue about October’s PMI is that the jobs outlook has dropped to its lowest level since February and has now shown 19 straight months of contraction.
Manufacturing is a key economic sector as it contributes 15 percent to GDP and has a knock-on effect on other aspects of the economy, Maluleke notes.
The new sales orders index also declined in October.
“This is the first positive survey for manufacturing for a few months and if this translates into an improvement in the official data, the sector could still post growth this year”.
The PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in around 450 manufacturing companies.
Reflecting falls in production and new orders, buying activity was reduced as manufacturers drew on existing inventories instead of purchasing new items.
But signs of a manufacturing recovery could help sway more Bank of England policymakers to vote for an interest rate rise in the coming months, economists said. An increase in Fed rates would have consequences well beyond US borders, increasing borrowing costs for dollar debtors in emerging markets, pushing up the greenback against a few major currencies and driving a global reallocation of investment money.
“Around 12% of panellists noted a decrease in output, in comparison to only 6% that recorded an expansion”, said Nikkei and Markit in a joint report today. A PMI slipped to 52.1 from 52.3 in September, compared with an initial reading of 51.6.
The rest of the manufacturing PMI reports will be released for the United Kingdom and the Euro zone (final) and then the US. Germany, France, Italy, and Spain were all in expansionary territory.
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The manufacturing sector has contracted in the last two quarters, meaning that by the usual definition, it is in recession. “Upcoming survey data will show how effective the central bank’s effort to revive the economy has been”. Stronger trends in output and new-order components were largely responsible for the upward revision of the euro-area gauge, Markit said.
