Global industry fortunes remain mixed

The state of global manufacturing still appears volatile, with US figures for June showing faster growth for the first time in four months, and Europe and Asia slowing in the period.

The US Institute for Supply Management’s purchasing managers’ index (PMI) rose to 55.3 in June from 53.5 in May, defying a forecast fall to 52. Readings above 50 signal expansion.

In contrast, Chinese manufacturing fell to its lowest level since February 2009 and dipped close to 50. Weaker industrial data from India and South Korea added to Asian worries.

In the UK, slumping export orders and jobs growth pushed the country’s PMI to a 21-month low.

The US data probably re­flected “that Japan is beginning to recover, and that manufacturers took advantage of lower input prices in the month of June as the price of oil and other commodities eased”, said John Canally, of LPL Financial.

The ISM report showed production and new orders picking up in June, accompanied by an increase in the employment index. Inventories swung from contraction to expansion as companies rebuilt stockpiles, while export orders fell. Prices eased for a second month.

“It’ll help to put to rest some of the talk of a soft spot [in the economy],” said Mr Canally. Analysts hope next week’s non-farm payrolls report will support that theory. The data are expected to show 90,000 new jobs created in June – up from 54,000 in May.

Manufacturing has been a big factor in helping the US recover from re­cession. Sectors such as aerospace, automotive manufacturing, industrial equipment and the high-tech industry “are all seeing good, steady growth in demand” that would be boosted by a pick-up in employment growth, said Rich Bergman, of Accenture’s manufacturing supply chain management practice.

However, construction spending data from the commerce department were “just terrible,” Mr Canally said. The figures suggested that second-quarter gross domestic product growth would be closer to 1.5 per cent compared with the 1.8 per cent in the first quarter.

Construction spending slipped 0.6 per cent to $753.5bn in May from April, and was 7.1 per cent lower than in May 2010.

Public sector building has been particularly hard hit, with spending down 9 per cent from its year-ago rate.

“That’s squarely a result of the budget cut that you’re seeing at the state and local government level,” Mr Canally said.

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