Mfg data shows China rise on global recovery signs: Markit

The global manufacturing data for November which was released on Monday showed that the Chinese manufacturing sector was expanding whereas in the euro zone, data indicates that the rate of contraction in the manufacturing sector has begun to slow down. Chris Williamson, chief economist, Markit Economics helps make sense of the data and the underlying factors and trends involved on CNBC-TV18.

Below is an edited transcript of the analysis on CNBC-TV18

Q: Getting to China first because we are seeing according to your numbers a return to growth for the manufacturing sector in China?

A: Yes. The government-sponsored surveys as well as the market indexes showed signs of a least stabilisation in China which is good news. There is much talk about whether this has all been indigenously generated by the government’s support. What is encouraging is that exports are showing some improvement. In fact, the global manufacturing index, when all the individual countries are considered together, has stabilised at 49.7, just below the 50-level. That's the highest it has been for five months. So there are signs that the worst maybe over and China is benefiting from that.

Q: Does the data from China seem sustainable? In the past month-and-a-half or two, a series of steps were taken by both the Chinese government and the central bank in order to help boost the economy and growth.

A: I think the initiatives have been a supporting factor, but the bigger picture globally is that that there are signs of manufacturing having bottomed out. I think the stimulus is in place in the US, in the euro zone and the UK, which is helping to prop up those economies. The worst maybe over for many of them in Q3 and we may see some uplift certainly in consumption which China will be benefiting going into next year as well.

Obviously there are huge uncertainties and in particular the fiscal cliff in the US States remains the obvious hurdle. The direction could change very rapidly if the US plunges into recession and I think China, certainly its manufacturing sector will suffer a setback as well. But hopefully that hurdle will be jumped and we will be able to see continuation of this trend with China benefiting not just from internal policies that are in place but also this steady turnaround in global trade flows.

Q: There were signs of manufacturing bottoming out across the world and I wonder whether it has bottomed out in Europe as well because though it does seem as the contraction has narrowed or the rate of the contraction has slowed, what is disappointing is that both the core economies of Germany and France continue to show a contraction in their manufacturing sectors..

A: Yes, there is no doubt that the euro zone remains deeply entrenched in a downturn and that downturn probably accelerated in Q4. We had a surprisingly mild donwturn in the Q3, just 0.1 percent of GDP. The PMI and many other surveys of German conditions are suggesting that things probably got lot worse in the Q4.

So the euro zone is struggling and we are seeing the UK as well continuing to contract in terms of its manufacturing sector. So Europe is probably contracting, but even there are signs that the worst is over. The euro zone manufacturing PMI was at an eight-month high and the rate of decline also is to a marginal rate in the UK.

So once again we are seeing signs of global trade flows at least falling at a slower rate than they were before and that is benefiting exporting countries such as the UK and Germany. That is what is helping the put a floor under that rate in decline in the key European countries.

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