The gradual upturn in manufacturing should be welcomed rather than alarming. The good news is that last year seemed like a foregone conclusion, as the global economy appears to have avoided a prolonged downdraft. The United States does not have to stand on its shoulders, at least not to the same extent, if not more.
Countries that are key nodes in the factory supply chain saw their economies accelerate in March. The Institute for Supply Management's indicators ended up being too high for some traders' tastes, but don't let that detract from the very strong performance of Asia's production lines and docks. If the region can perform better than last year's so-so performance, it could make a real contribution to long-term global expansion.
This is more worthy of praise than despair. Yes, the expansion of U.S. manufacturing for the first time since 2022 has pushed back predictions about how much stimulus the Federal Reserve will give to the economy and when that modest easing will begin. Some policymakers had already expressed concern about the prospect of multiple rate cuts from the Fed ahead of Monday's ISM report. America's unexpectedly strong numbers don't have to be a major setback. Central bank leaders have long stressed there is no need to rush.
The U.S. economy is performing well given the rapid monetary tightening that characterized 2021 and 2022. China is a major country that has received a lot of bad press. Any positive data on manufacturing would therefore be particularly welcome. Hours before the ISM report, figures showed China's closely watched Purchasing Managers' Index rose more than expected in March. The activities of the factory expanded for five months. Among other positive signs, exports are picking up and the longest period of deflation since the 1990s ended in February.
None of this means that China's struggle is over. The real estate crash continues to weigh on growth, consumer sentiment is weak and businesses are reining in spending, with further stimulus likely to be needed. But compared to the bad vibes and the narrative that China is over, it would be foolhardy not to acknowledge the good news when it comes. Currently, there may be too many negative opinions about the world's second largest economy.
Manufacturing also had a productive month in Japan and Taiwan. South Korea's disappointing results were tempered by strong export performance. Semiconductor shipments increased by 36% from the previous year. There's a lot to like here.
Bloomberg Nor does it mean industrial production has hit a sweet spot. The World Trade Organization is negative on the outlook. But let's take a little help from what's working. It wasn't long ago that a global recession seemed like a reasonable bet. After all, central banks are desperate to rein in expansion, and overshoots are common. Authorities tend not to realize that restrictive policies are working until it is too late. This concern was particularly prevalent in the euro area and the UK. Expansion in Asia continued, but was slowed by China's woes. Only the United States seemed well enough to carry the load.
Those concerns are beginning to be dispelled. Although it is still too early to turn cartwheel, things are improving for some of the world's key bellwethers. Don't let the perfect become the enemy of the good. Something good happened in March.
