Sunday 22 April 2018

Global economy on mend as firms boosted by orders surge

Jonathan Cable

A flood of new orders gave a boost to European and Chinese firms in September, according to a clutch of surveys which added to evidence that the global economy is healing.

Yesterday's upbeat purchasing managers' indexes, surveying thousands of companies across the globe, came ahead of figures for the US factory sector which are expected to show the world's largest economy is also continuing to recover.

"The global economy is gathering momentum . . . growth is strengthening. Eurozone economies are gradually emerging into a recovery that is sustainable," said Philip Shaw at Investec. "And, it's fairly clear from its performance so far in 2013 that the US recovery has gained some traction in the face of some fairly heavy fiscal challenges."

The US Federal Reserve surprised markets last week by postponing a reduction of its massive stimulus programme, while downgrading its growth forecasts.

Conflicting views from policymakers of when the wind-down will come has left markets uneasy, while the threat of another fight on Capitol Hill over how much the United States can borrow loomed large.

The uncertainty emanating from Washington took the shine off a German election triumph for Angela Merkel which confirmed she would remain Europe's dominant leader as the continent tries to put its debt crisis to bed.

Still, the bloc should be able to take on its continuing challenges from a position of improving economic growth.

Survey firm Markit's eurozone Flash Composite Purchasing Managers' Index (PMI) jumped to 52.1 from last month's 51.5, its highest since June 2011 and beating expectations for a reading of 51.9.

A reading above 50 indicates growth.

The pace of expansion in the bloc's dominant services sector also beat all forecasts in a Reuters poll and the surveys suggested the recovery was becoming more broad based.

Business at firms in Germany expanded at a faster pace than last month and in France activity increased – albeit marginally – for the first time in 19 months.

Markit said the composite PMI, which surveys both manufacturing and service-sector companies across the region and is seen as a good guide to economic growth, pointed to a 0.2pc expansion this quarter, matching a Reuters poll taken earlier this month.

The Chinese flash HSBC PMI climbed to 51.2 this month from August's 50.1, hitting a high not seen since March. A breakdown of the data showed 10 of 11 sub-indices rose in September.

"Today's figure adds to the raft of recent better-than-expected Chinese data, indicating that the growth slowdown has already run its course and industrial activity is gaining traction," said Nikolaus Keis at UniCredit.

In July and August there were concerns that growth could be slower than the government's target of 7.5pc, which would already be the slowest growth in more than two decades. Most analysts now say the 2013 target will be met.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business