Manufacturing strengthens in Europe and Asia despite fears over US

Factories across Europe and much of Asia posted another month of solid growth in March, rounding off a strong quarter for manufacturers, even though exporters fear a rise in US protectionism could snuff out a global trade recovery.

China led the way, with an official manufacturing index expanding at the fastest pace in nearly five years. Surveys on Monday also showed encouraging growth in Europe, Japan, India and much of emerging Asia.

In the United States, activity retreated in March from a 2½-year high amid a decline in production and an inventory drawdown, but the trend remained bullish with a surge in factory jobs indicated that the sector's energy-led recovery was gaining momentum.

The Institute for Supply Management (ISM) said its index of national factory activity fell to a reading of 57.2 last month from 57.7 in February, which was the highest since August 2014, but far above the 50 mark that separates growth from contraction.

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Irish growth slows

The rate of growth in Ireland's manufacturing sector also slowed marginally, falling to the slowest rate since October. The Investec purchasing managers' index (PMI) eased to 53.6 as output, new orders and purchasing activity grew at weaker rates. The survey, which serves as an indicator of the health of the manufacturing sector, has now fallen in three successive months.

However, there were positives to be taken from the data. Although new orders also eased, export business showed a sharp rise, and employment continued to rise.

In the euro zone, IHS Markit’s final manufacturing purchasing managers’ index rose to a nearly six-year high of 56.2 in March as unemployment fell to the lowest point in almost eight years.

The average jobless rate declined to 9.5 per cent in February from 9.6 per cent in January. It’s been decreasing steadily from a peak of more than 12 per cent in 2013 and is now at the lowest since May 2009.

"Those who had doubts about the equity of our asset-purchase programme are being answered because the most equitable measure of all is to create employment and to decrease unemployment," European Central Bank president Mario Draghi said.

Momentum lost

However, British manufacturers lost some momentum, as export orders grew more slowly and rising inflation cut into consumer demand.

Sterling's tumble following last June's vote to leave the European Union helped manufacturers enjoy their fastest annual growth in three years during the final quarter of 2016 but the sector's PMI suggested growth slowed in the first three months of this year.

"Greater optimism about global growth prospects appears to be providing a boost, while the fall in the value of the pound post-Brexit is helping new orders," James Smith at ING said of the British PMI.

The official Chinese PMI rose to 51.8 in March from 51.6, thanks to a months-long construction boom which is helping to boost resources prices around the world. That was the strongest reading since April 2012, though a private survey focusing on smaller companies suggested a more cautious outlook, raising questions about whether the export recovery can be sustained. – (Bloomberg/Reuters)