Tuesday, January 5, 2010

Global Manufacturing Rebounding

From the WSJ:

In Asia, where countries in large part weathered the downturn better than their Western counterparts, manufacturing is heating up inflation concerns.

The HSBC purchasing managers' index for India hit its highest level since May, and for China rose to the highest level in 20 months. The reports Monday came as Asian countries considered dialing back fiscal-stimulus efforts and easy monetary policies adopted during the crisis.

Australia's central bank was among the first to raise its key policy rate, and market watchers were waiting to see whether such recovering nations as India and South Korea would follow suit.

Purchasing managers' indexes for Germany, Italy and France also rose. In Britain, the manufacturing sector expanded at its fastest pace in more than two years, indicating the U.K. economy may have emerged from recession in the fourth quarter.

Why is this important?

Manufacturing's share of the U.S. economy is much smaller than it was in the 1980s. But it remains an important bellwether, highly sensitive to changes in the economy. Many nonmanufacturing businesses -- from car dealers to long-haul truckers -- rely on its good health to survive.

Manufacturing is still a good indicator of when an economy is turning around. That's why we look at it.