Manufacturing Contracting Globally

Manufacturing contracted in February as the PMI registered 35.8 percent, which is 0.2 percentage point higher than the 35.6 percent reported in January. This is the 13th consecutive month of contraction in the manufacturing sector. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

Japan says its industrial output plunged a record 10 percent in January, another sign the world’s second-largest economy is facing its worst economic recession since the end of World War II. January’s bad numbers break the previous record of 9.8 percent set just the month before.

A gauge of manufacturing activity declined to 33.5 from 34.4 in January, lower than an initial estimate of 33.6 published on Feb. 20. The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates contraction.
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The manufacturing index for Germany, Europe’s largest economy, was at 32.1 in February, lower than the initially reported 32.2, according to a separate report. Italy’s dropped to 35 from 36.1 and the French gauge declined to 34.8 from 37.9, less than the initial estimate.
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The International Monetary Fund predicts the euro area economy will contract 2 percent this year.

The CLSA China Purchasing Managers Index, produced by U.K.-based research firm Markit Group Ltd., came in at 45.1 in February, compared with 42.2 in January. The index registered a record low of 40.9 in November. A PMI reading below 50 indicates contraction.

It was the third straight month that the PMI came in higher than the month before, which provided some hope that China’s economy, which grew at its slowest pace in seven years in the fourth quarter of 2008, might be starting to stabilize. But economists are far from declaring an economic rebound.