Markit reported that manufacturing activity edged somewhat higher in March, continuing its recent gains. The Flash Manufacturing Purchasing Managers’ Index (PMI) for the United States rose from 54.3 in February to 54.9 in March. This figure was boosted by a pickup in new orders (from 55.4 to 55.9), exports (from 48.5 to 51.2), and employment (from 53.5 to 54.6). Note that new export orders shifted from contraction to expansion, which was a good sign. Output also increased, but at a slower rate, down from 57.3 to 56.8. With that said, those numbers indicate decent growth in production overall.
Similarly, the economy in China has also been improving. The HSBC Flash China Manufacturing PMI increased from 50.4 in February to 51.7 in February. This follows the somewhat surprising decline in February, bringing March’s PMI reading closer to January’s 52.3 number. The pace of growth for output, new orders, and exports accelerated; while hiring slowed down slightly but continued to grow. This data show that China continues to experience modest growth overall, much as it has since October. Prior to that point, the Chinese economy had contracted for 12 straight months.
These two surveys stand in contrast to what Europe is experiencing. The Markit Flash Eurozone PMI dropped from 47.8 in February to 46.5 in March, its lowest level since December. Manufacturing activity was down across-the-board, with declining sales, output, and employment. The economic situation in Europe continues to deteriorate, with very weak activity in countries such as France (with their Flash PMI unchanged at 43.9) and even Germany (down from 50.3 to 48.9) facing lackluster growth.
Of course, the banking crisis in Cyprus and its ability to remain in the European Union have served to further reduce confidence. Markit Chief Economist Chris Williamson said, “The deteriorating situation in Cyprus also raises the prospect of business and consumer confidence falling further across the single currency area, and possibly dragging the PMI numbers down further in April.” This suggests that the data for April are expected to continue to reflect a contraction on the continent.
Chad Moutray is chief economist, National Association of Manufacturers.