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World manufacturing starts 2018 on strong note

Purchasing managers' indices for major economies currently close to record highs

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A worker arranges steel bars at a factory in Beijing, China November 22, 2017.

Singapore

FACTORIES could be bracing for busy months in 2018, as the start of the year saw Purchasing Managers' Index (PMI) figures of major economies keeping strong momentum, with some staying close to record highs.

Singapore's PMI was at its highest since December 2009. In the region, the Nikkei Asean manufacturing PMI saw a return to growth in January after a subdued end to 2017.

But one outlier was Britain, where manufacturing growth slipped to a seven-month low.

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PMI data, collected through surveys of purchasing managers, provide an early indication of manufacturing activity. A reading of 50 or above indicates expansion.

The eurozone's manufacturing sector continued its strong run, with the 55th straight month of expansion.

Although January saw growth rates of output and new orders easing from end-2017's near-record highs, they remained among the highest since the survey began in 1997.

The IHS Markit eurozone manufacturing PMI was 59.6 in January, down from December's record high of 60.6.

In Europe's four biggest economies, PMIs were close to record highs in Germany and Italy and among the best for 17 years and a decade in France and Spain respectively.

But in Britain, the manufacturing sector saw slowing momentum as it faced one of the biggest jumps in raw material costs in decades. The IHS Markit/CIPS UK PMI fell to 55.3 in January, the lowest level since June 2017.

Chartered Institute of Procurement & Supply (CIPS) director of customer relationships Duncan Brook characterised 2018 as starting "on a positive, if slightly reserved note".

Noting that job creation remained strong, optimism was at a two-year high and export orders had spiked, he said: "Along with the strength of the global economy and investment by the sector in marketing and product launches, this is setting (British) manufacturing up for a successful year ahead."

In the United States, survey readings varied in topline figures but were consistent in showing that manufacturing expansion was led by new orders and production.

The US Institute for Supply Management's manufacturing PMI came in at 59.1, down from 59.3 in December. The IHS Markit US manufacturing PMI, meanwhile, was at 55.5 - but this was up from 55.1 in December and marked the strongest upturn since March 2015.

In Asia, the strongest manufacturing readings came from tech exporters riding a robust semiconductor cycle, said Reuters.

The Nikkei/Markit manufacturing PMI for Japan showed growth at a four-year high, while Taiwan's reading was its highest since April 2011.

South Korean factory activity bounced back into expansionary territory in January, with the PMI up to 50.7 from 49.9 in December.

Similarly, Asean manufacturing saw renewed if fragile growth. The Nikkei/Markit Asean manufacturing PMI rose to 50.2 in January from 49.9 in December, boosted by marginal rises in new orders, employment and production.

In China, the Caixin/Markit PMI was steady at 51.5, matching December's reading, with output growth at a 13-month high.

CEBM group director of macroeconomic analysis Zhengsheng Zhong noted, however, that "overall new business and new export orders increased at a slower pace than in the previous month, pointing to slightly moderating demand".

"The manufacturing industry had a good start to 2018. Going forward, we should keep a close eye on the stability of the demand side," he said.

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