NEW YORK/BEIJING: Strong demand at home boosted activity at Chinese factories last month, but US manufacturing hit an unexpected speed bump after expanding rapidly in February, weakened by a slower pace of new orders.
Other surveys released yesterday showed manufacturing sectors in South Korea and Japan growing as exports increased, while Brazil faced sharply slower output and rapidly rising prices, suggesting a manufacturing recovery remained tenuous.
Most European markets were closed yesterday for Easter.
For the US and China, last month was largely a story of domestic demand. The US Institute for Supply Management’s factory purchasing managers index showed new orders slowed sharply in March, a month after rising demand boosted the index to its highest level since mid-2011.
“This comes as a disappointment,” said Tom Porcelli, chief US economist at RBC Capital Markets, who noted that recent strong consumer income and spending data last week had suggested the broader economy would grow strongly in the first quarter.
“What this support suggests is that the quarter probably ended with a loss of momentum,” he said, adding RBC expects the economy to have grown by 3.2 percent at an annualized rate between January and March after expanding 0.4 percent in the fourth quarter of 2012.
“The biggest concern was the drop in new orders,” said Craig Dismuke, chief economic strategist at Vining Sparks in Memphis, Tennessee. “Maybe we are seeing a cutback in business spending. We could see a slowdown in the spring.”
However, a separate gauge of US manufacturing from financial information firm Markit showed the first quarter was the sector’s best in two years and should contribute to overall first-quarter growth. While the two surveys use the same sub-indexes, they give different weights to the components.
New orders at Chinese factories, meanwhile, rose sharply, though an uncertain outlook for exports could still slow the speed of economic recovery there. So, too, economists say, could premature tightening of China’s current loose monetary policy.
The central bank eased conditions last year, thereby increasing credit and helping avert a more pronounced slowdown in the world’s second largest economy.
“Growth momentum has been stabilizing, but headwinds remain,” Liu Li Gang and Zhou Hao, economists at ANZ, said in a note to clients. “The current economic rebound remains fragile, and could falter with tightened monetary policy conditions.”
China’s official manufacturing purchasing managers’ index (PMI) released by the National Bureau of Statistics rose to an 11-month high of 50.9 in March. Reuters
