Manufacturing activity expands

China are likely to continue lifting production, a Nomura/JMMA survey showed. (SUPPLIED) 

Global manufacturing activity increased in December showing further signs of sustained economic recovery.

Factories in Asia stepped up production in December, with China's output growing at its fastest pace on record suggesting economic activity is gathering pace in the region that is leading the global recovery.

While manufacturing activity in the euro zone expanded at its fastest rate in 21 months in December, in line with the flash estimate published last month, but new orders growth slowed slightly, a survey showed on yesterday.

Manufacturing activity hit a seven-month peak in India last month and it also rose in South Korea, where factories added the most jobs in nearly two years, purchasing managers' indexes (PMI) showed yesterday.

In China, the HSBC PMI rose to 56.1 from 55.7 a month earlier to reach its highest level since the survey began in April 2004. A reading above 50 indicates manufacturing activity is expanding, while a level below 50 suggests contraction.

"China's manufacturing PMI will likely remain above 50 and even accelerate in coming months, as exports are improving, private investment is coming back and public investment remains robust," Ting Lu, an economist at Bank of America-Merrill Lynch said in a research note.

Growth in Japan's manufacturing activity picked up for the first time in three months in December and upbeat export orders from China are likely to continue lifting production, a Nomura/JMMA survey showed last week.

Russia's PMI fell to 48.8, the lowest in five months, from 49.1 in November. In the last 17 months, the index has only once risen above 50, which was in September 2009.

Output in India and South Korea gained momentum, underlining expectations that they will be the first Group of 20 nations after Australia to raise interest rates following the crisis.

The Bank of Korea reviews monetary policy on Friday, while the next scheduled meeting of the Reserve Bank of India is on January 29.

India's PMI rose for the first time in three months in December to 55.6, the highest level since May, from 53 in November.

South Korea's index increased to 52.84, the highest point since August, from 52.61 in November.

Chinese manufacturers raised their prices at the fastest rate in 17 months in December, the PMI showed. Companies said the inflationary pressure came from a combination of buoyant market demand and rising raw material prices, particularly for steel.

In Europe, the final Markit Eurozone Manufacturing Purchasing Managers' Index for December rose to 51.6 from 51.2 in November, its highest level since March 2008. Outside the euro bloc, British manufacturing activity expanded at its fastest pace in more than two years last month, buoyed by a sharp jump in new orders, suggesting the struggling economy ended 2009 on a solid footing.

December 2009 marked the third consecutive month that the manufacturing PMI for the 16-member bloc was above the 50 level that divides growth from contraction. But markets were unmoved on the data as the report was not all good news.

The new orders index slipped to 53.6 from a flash reading of 53.9 and down from a 27-month high of 53.8 in November.

The manufacturing output index rose to 55.1 last month from 54.8 in November, but also slightly down from the flash reading of 55.2 published in the middle of December.

Markit said investment and consumer goods production across the euro zone accelerated in December, while production of intermediate goods slowed.

Overall manufacturing activity in Germany, the 16-nation bloc's biggest economy, expanded at its fastest pace since May 2008, although more slowly than previously expected, while activity in France and Italy also ticked up from November.

Italian production saw its best performance in 27 months. But it was a different story in Spain, where manufacturing has contracted for over two years and did so at a faster pace last month than in November.

Spain also experienced the sharpest rate of order book contraction in the euro zone, Markit said.

 

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