Manufacturing sector shows record growth in December

Buildings in Beijing shrouded by smog. Wikimedia Commons

Buildings in Beijing shrouded by smog. Wikimedia Commons

German factories shifted into overdrive in December as strong foreign demand propelled growth in activity to a record high and capacity constraints led to the biggest delivery delays in more than 20 years, a survey showed on Tuesday. Consequently, firms increased their selling prices notably.

Smith said the PMI not only posted the highest reading ever recorded since the survey began in 1996, but its current 37-month sequence of improving business conditions also beat the previous record set in the runup to the financial crisis.

Asia's factories ended a strong 2017 on a mixed note, with activity at multi-year highs in Taiwan and India and surprisingly picking up in China, but contracting in some places in a sign regional interest rate hikes likely will be gradual.

The new order index of the non-manufacturing businesses stood at 52 in December, up 0.2 points from a month ago.

"Despite reports of subdued demand conditions, firms raised their payroll numbers to meet production requirements", it said. Furthermore, the rate of growth quickened to the sharpest since October 2016. "New export orders picked up", Orlik said. The pace of job creation was the strongest since September. "Anecdotal evidence pointed to stronger market demand from home and global markets", said Aashna Dodhia, economist at IHS Markit, which compiles the survey.

Output expanded at the same pace as in August, matching the highest monthly rate of the year, with companies citing improved sales and stronger underlying market demand as key sources of economic growth.

"In the details, output and new orders sub-indexes were both down slightly but still robustly in expansionary territory".

However, the sector continues to face some turbulence as delayed customer payments contributed to greater volumes of outstanding work.

However, input costs rose at their fastest pace in nine months, as prices for raw materials rose. "As consumer spending recuperates, firms were restricted in their ability to pass on higher cost burdens to clients which further placed upward pressure on firms' margins".

Manufacturers' optimism about their business prospects over the next 12 months rebounded from November's record low, but remained well below the historical average, according to the Caixin survey.

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