Article / 06 January 2014 at 9:32 GMT

World's manufacturers drive global growth

Mads Koefoed Mads Koefoed
Head of Macro Strategy / Saxo Bank
Denmark

By Mads Koefoed

Bottom line: A preliminary look at our global PMI tracker suggests that the world's manufacturers have ramped up activity. This is expected to translate into overall higher global growth in line with my 2014 forecast.

PMI manufacturing
Source: Bloomberg and Saxo Bank

Details: Our global PMI manufacturing tracker currently stands at 54.2 in December, unchanged from November but otherwise the highest in more than a year, which suggests that activity is rising at manufacturers around the world. Though a couple of countries have not released December reports yet, the heavyweights such as the US, the euro area and China have, and the trend is certainly pointing towards stronger growth in the world economy.

Global economy
Source: Bloomberg and Saxo Bank

Regional differences remain, however, with the 'old economies' like the US and the UK at (or close to) cyclical highs and the euro area has also improved noticably in recent months from 48.8 in mid-2013 to 52.7 six months later. China on the other hand struggles to get out of the 50-to-51 range in which it has been stuck for more than a year. And slower growth in China is not only China's problem. Australia, in particular, is suffering as a result* with a 47.6 reading in December, and only two of the last twelve months have pointed to expansion (i.e. above 50).

Overall, the December PMI manufacturing reports seems to confirm my view that global growth will be higher this year. Watch out for Saxo Bank's Q1 Quarterly Outlook for more information on our take on the global economy and markets. It will be released tomorrow, January 7.

 

* Suffering in a relative sense, that is. Australia is estimated to have grown 2.4 percent last year.

 

(xcma)

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