Monday, 4 February 2013

Global economy improving amid signs of US rebound

Data last week showed that the United States economy shrank in the final quarter of last year but may already be leading the rest of the world back to growth at the beginning of the new year.

The Commerce Department reported last week that US real gross domestic product fell at an annual rate of 0.1 percent in the fourth quarter of 2012. The decline was mainly due to a decrease in government outlays and a smaller rise in inventory.

Data for January, however, showed that the US economy may have already returned to expansion. Nonfarm payrolls increased by 157,000 in January and manufacturing activity accelerated, with the Institute for Supply Management's manufacturing PMI jumping to 53.1 last month from 50.2 in December and Markit's US manufacturing PMI rising to 55.8 from 54.0.

Not all the latest US data were positive though. The unemployment rate rose to 7.9 percent in January from 7.8 percent in December. And while the Thomson Reuters/University of Michigan index of consumer sentiment rose to 73.8 in January from 72.9 in December, the Conference Board's consumer confidence index plunged to 58.6 last month from 66.7 in December.

Still, the Federal Reserve appears relatively sanguine about the economy. It left monetary policy unchanged after its meeting last week, saying that the economy had “paused in recent months in large part because of weather-related disruptions and other transitory factors”.

Meanwhile, the eurozone economy appears to be on the mend at the start of 2012. A report from Markit last week showed that its manufacturing PMI for the euro area rose to 47.9 in January, its highest level in 11 months, from 46.1 in December. In addition, the European Commission's economic sentiment indicator rose for the third consecutive month to 89.2 in January, its highest level since June, from 87.8 in December.

Like the euro area, manufacturing in Japan showed contraction last month but at a slower rate. The Markit/JMMA PMI rose to 47.7 in January from 45.0 in December.

In contrast to the euro area and Japan, manufacturing activity appears to have grown in China in January. The HSBC manufacturing PMI rose to a two-year high of 52.3 in January from 51.5 in December. The manufacturing PMI from the China Federation of Logistics and Purchasing and the National Bureau of Statistics fell to 50.4 in January from 50.6 in December, which still indicates probable growth in manufacturing activity last month.

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