Global manufacturing continues to show signs of recovery. Most of the encouraging news, however, is due to the burning off of inventories that already existed when manufacturing fell off a cliff late last year. So the question is, what happens next? In the U.S., at least, the answer probably is “more disappointment.”
As this chart from Northern Trust’s Asha Bangalore shows, the U.S. ISM index just logged its fourth straight monthly gain. The index is still below 50 and therefore signaling a contraction, but it’s better than it was four months ago.
The recovery in global manufacturing has come primarily because companies have sold off much of their accumulated stocks and are re-starting mothballed production lines. Once this temporary boost is completed, serious questions remain about the source of longer-term demand to maintain the current momentum.
The June data on Wednesday came from a series of surveys of purchasing managers in the manufacturing sector, the area of the global economy hardest hit by the recession. Although the headline figures were positive only in China, the manufacturing output element of the data was positive in the US, the UK and Japan as well.
The speed of contraction in continental European economies has also decreased substantially since the start of the year, when pessimism was at its height, registering the most positive signs from industry in the past 10 months.
Chris Williamson, the chief economist of Markit economics, said: “The global manufacturing economy is being led out of recession by China, which registered a third consecutive monthly rise in output and the largest increase for a year.”
See Also: Tracking The Second Great Depression
Business Insider Emails & Alerts
Site highlights each day to your inbox.