Executive Briefings

Factories Hum From Detroit to Dortmund As World Economy Improves

Factories from America’s Rust Belt to Germany’s Ruhr region to Japan’s Aichi prefecture are revving up production lines in a unified acceleration not seen in years.

Global manufacturing indexes have forged ahead to multiyear highs, in concert with improving economies rich with the tinder of easy monetary policy. In the U.S., a resurgence in corporate investment is driving equipment orders. Germany, where business sentiment is near a record, is helping engineer a pickup in Europe’s economy.

Combined with solid manufacturing in Japan, a measure of activity among producers in developed nations has muscled ahead to the highest level in nearly seven years. The collective strength in the biggest industrial economies is more than offsetting a stabilization in production at China’s factories.

What Our Economists Say

“With the global economy gradually heating up and threats of protectionist policies not yet translating into action, the manufacturing sector should remain on the upswing ... China, the world’s largest manufacturer, will pursue a politically driven slowdown to reduce leverage and overcapacity, as the country’s economy moves toward a new growth model, which will continue to weigh on manufacturing growth.” –Michael McDonough, Bloomberg Economics

One benchmark of worldwide demand for raw materials is in a steady uptrend that began around midyear. The Baltic Dry Index, a measure of freight rates for shipping dry bulk commodities around the globe, recently hit its highest point since early 2014. As economic activity picks up, prices tend to follow along with demand for industrial materials.

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Global manufacturing indexes have forged ahead to multiyear highs, in concert with improving economies rich with the tinder of easy monetary policy. In the U.S., a resurgence in corporate investment is driving equipment orders. Germany, where business sentiment is near a record, is helping engineer a pickup in Europe’s economy.

Combined with solid manufacturing in Japan, a measure of activity among producers in developed nations has muscled ahead to the highest level in nearly seven years. The collective strength in the biggest industrial economies is more than offsetting a stabilization in production at China’s factories.

What Our Economists Say

“With the global economy gradually heating up and threats of protectionist policies not yet translating into action, the manufacturing sector should remain on the upswing ... China, the world’s largest manufacturer, will pursue a politically driven slowdown to reduce leverage and overcapacity, as the country’s economy moves toward a new growth model, which will continue to weigh on manufacturing growth.” –Michael McDonough, Bloomberg Economics

One benchmark of worldwide demand for raw materials is in a steady uptrend that began around midyear. The Baltic Dry Index, a measure of freight rates for shipping dry bulk commodities around the globe, recently hit its highest point since early 2014. As economic activity picks up, prices tend to follow along with demand for industrial materials.

Read Full Article