Manufacturing in U.S., Europe, China Leading Global Expansion

Manufacturing in U.S., Europe, China Leading Expansion
An employee assembles a Daimler AG Mercedes-Benz V6 diesel engine on the production line at the company's factory in Berlin. Photographer: Michele Tantussi/Bloomberg

Manufacturing in the U.S., Europe and China grew in November, a sign that the global recovery is gaining traction as the year draws to a close.

Manufacturing in the U.S. expanded for a 16th straight month in November, the Institute for Supply Management reported today. U.K. manufacturing growth unexpectedly accelerated to the fastest in 16 years in November, while China’s output grew at a faster pace for a fourth month, separate reports showed.

Manufacturers such as Stuttgart, Germany-based Daimler AG, Bath, England-based Rotork Plc and Midland, Michigan-based Dow Chemical Co. remain at the forefront of the recovery as growing demand abroad fuels exports and companies invest in new equipment. Asian demand for consumer goods has contributed to higher global output, said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina.

“Manufacturing has led in part because of inventory rebuilding and the need for consumer durables, especially in Asia,” said Silvia, a former congressional economist. “There is a global economic recovery in place. This should add confidence to the sustainability of global recovery.”

The global economy will expand 4 to 5 percent this year, International Monetary Fund Chief Economist Olivier Blanchard said last month. The probability of the global economy contracting in 2011 is about 2 percent and in the U.S. it is about 10 to 15 percent, he said.

The U.S. economy grew at a 2.5 percent rate in the third quarter, according to revised Commerce Department data Nov. 23, compared with 1.7 percent in the second quarter. Employment in the U.S. rose in October for the first time in five months, the Labor Department reported Nov. 5.

Regaining Momentum

“The economy seems to be regaining some momentum,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “Inventories are still in pretty good shape, so any gains at the consumer level should translate into improving activity at the manufacturing level.”

Risks to global growth remain, including the European debt crisis and continued weakness in U.S. housing. Real-estate prices in 20 U.S. cities rose in September at the slowest pace in eight months, according to the S&P/Case-Shiller index.

The housing concerns aren’t derailing manufacturers. The ISM’s factory index was 56.6 in November, little changed from the five-month high of 56.9 in October. The figure compared with a median estimate of 56.5 in a Bloomberg News survey of 83 economists. Readings greater than 50 signal growth.

Global Gains

A gauge of U.K. manufacturing growth based on a survey of companies by Markit Economics and the Chartered Institute of Purchasing and Supply rose to 58 from 55.4 in October. The median forecast of 24 economists in a Bloomberg News survey was for 54.7. A measure above 50 also indicates expansion.

In Europe, manufacturing expanded at the fastest pace in four months in November, led by Germany, the region’s largest economy. A gauge of manufacturing in the 16-nation euro area rose to 55.3 from 54.6 the prior month, London-based Markit Economics said today.

China’s manufacturing grew at a faster pace for a fourth straight month in November. The Purchasing Managers’ Index rose to 55.2 from 54.7, China’s logistics federation said on its website today.

The Chinese picture of stronger manufacturing and climbing prices was repeated across Asia in reports released today by HSBC and Markit for India, South Korea and Taiwan.

‘Going Gangbusters’

India needs to keep tightening monetary policy, HSBC economist Leif Eskesen said, commenting on PMI data showing the nation’s fastest manufacturing growth in six months. Taiwan had its first expansion in four months and South Korea, too, switched from a contraction.

Dow, the world’s second-biggest chemical company, said yesterday that fourth-quarter sales are matching those of the prior three months, led by demand for materials used in electronics.

Electronics demand is “going gangbusters,” and commodity plastics and chemical sales are still strong, Bill Weideman, chief financial officer, said in an investor presentation. “Overall demand is very solid.”

General Motors Co. is among those companies boosting production and hiring. The maker of the Chevrolet Volt gasoline- electric car plans to add 1,000 engineers in Michigan to help expand the automaker’s lineup of electric-drive vehicles. The hiring will increase GM’s workforce of electric-vehicle engineers by 50 percent to about 3,000, said Rob Peterson, a spokesman for the Detroit company.

“Globally, the manufacturing sector continues to lead in most of these economies,” Norbert Ore, chairman of the U.S. ISM factory survey, said in a conference call from Atlanta. “It apparently has the ability to continue for the foreseeable future.”


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