Global manufacturing appears to positively respond to the artificially low interest rates and the record steep year curve.
Here's is the Wall Street Journal, (bold highlights minee)
``Factories around the world are ratcheting up production, fueling optimism that the global economic recovery has legs.
``The U.S. manufacturing index in March registered its best reading since 2004, and China's manufacturing sector grew for the 13th straight month. Most euro-zone nations also have seen strong factory expansion, with Germany last month posting its best manufacturing growth in a decade. Only Greece, which is struggling with debt problems, contracted."
Although the "recovery" appears uneven, much of it owes to globalization.
Again from the Wall Street Journal,
``In terms of output, manufacturing in many parts of the world remains far from its prerecession high. In the euro zone, factory output in January was 16% below its peak in April 2008, while U.S. factory output in February was 12% below its prerecession high. Only Asian output is above the level it reached before the financial crisis.
``Manufacturing often is one of the first parts of the economy to revive after a recession. But this recession was deeper and longer than any downturn since the Depression. Big parts of the U.S. and global economies—including real estate and consumer spending—show continued strain.
``Many U.S. employers remain reluctant to hire. The ISM survey showed that manufacturing employment continued to improve in March, though at slower pace than the month before. Separate data from the U.S. Labor Department showed that new jobless claims fell by 6,000 to 439,000 last week. The department releases its closely watched snapshot of the March job market on Friday.
``U.S. manufacturers remain dependent on foreign demand. "The world has gotten smaller, and a lot of us are much more global," says Tim Sullivan, chief executive of Bucyrus International Inc., a Milwaukee-based manufacturer of mining machinery. The company, which is adding about 500 workers to its 2,500 U.S. employees, is drawing about 80% of its business from abroad, mostly Brazil, Russia, India and China. ‘
``"It's really a tale of two worlds right now," Mr. Sullivan says. "The Western Europe and U.S. economies are going to recover, but they're going to recover slowly."
``China's manufacturers are the furthest along. The factory sector there turned up in March 2009 as a big stimulus program took hold. In recent months, overseas orders started to return. The nation's exports, after shrinking for 13 months, started growing again in December, and so far this year are up 31%."
And it is more than that.
The gains in US manufacturing is seen being accompanied by rising producer prices, the same symptoms that essentially plagues China today.
In short, this is inflation rearing its ugly head-globally.
According to Business Insider,
(all bold emphasis mine)
``the ISM Manufacturing Prices index jumped 8 points in March, to 75 from 67. This signals a sharp rise in inflationary pressure. According to the ISM, 17 industries reported paying higher prices on average in March and no industry reported paying lower prices." (see chart above)
``Furthermore, the Producer Price Index (PPI) for crude materials in orange below, a rise in the ISM Prices Index makes a rise in the PPI highly likely, as highlighted by Waverly Advisors. This means we should expect more confirmation of inflationary forces in the near future."
So both signs- the recovery in the manufacturing sector and the attendant inflation- appears to gradually confirm our suspicion that today's recovery is just another facet of the intertemporal process or the ongoing gradation of the Austrian Business or Trade cycle.
Here is Mr. Ludwig von Mises,
``In issuing fiduciary media, by which I mean bank notes without gold backing or current accounts which are not entirely backed by gold reserves, the banks are in a position to expand credit considerably.
The creation of these additional fiduciary media permits them to extend credit well beyond the limit set by their own assets and by the funds entrusted to them by their clients. They intervene on the market in this case as "suppliers" of additional credit, created by themselves, and they thus produce a lowering of the rate of interest, which falls below the level at which it would have been without their intervention. The lowering of the rate of interest stimulates economic activity. Projects which would not have been thought "profitable" if the rate of interest had not been influenced by the manipulations of the banks, and which, therefore, would not have been undertaken, are nevertheless found "profitable" and can be initiated. The more active state of business leads to increased demand for production materials and for labor.
``The prices of the means of production and the wages of labor rise, and the increase in wages leads, in turn, to an increase in prices of consumption goods. If the banks were to refrain from any further extension of credit and limited themselves to what they had already done, the boom would rapidly halt. But the banks do not deflect from their course of action; they continue to expand credit on a larger and larger scale, and prices and wages correspondingly continue to rise." (bold emphasis mine)
So the answer seems to be a yes. Thereby, enjoy it while it last.
Here's is the Wall Street Journal, (bold highlights minee)
``Factories around the world are ratcheting up production, fueling optimism that the global economic recovery has legs.
``The U.S. manufacturing index in March registered its best reading since 2004, and China's manufacturing sector grew for the 13th straight month. Most euro-zone nations also have seen strong factory expansion, with Germany last month posting its best manufacturing growth in a decade. Only Greece, which is struggling with debt problems, contracted."
Although the "recovery" appears uneven, much of it owes to globalization.
Again from the Wall Street Journal,
``In terms of output, manufacturing in many parts of the world remains far from its prerecession high. In the euro zone, factory output in January was 16% below its peak in April 2008, while U.S. factory output in February was 12% below its prerecession high. Only Asian output is above the level it reached before the financial crisis.
``Manufacturing often is one of the first parts of the economy to revive after a recession. But this recession was deeper and longer than any downturn since the Depression. Big parts of the U.S. and global economies—including real estate and consumer spending—show continued strain.
``Many U.S. employers remain reluctant to hire. The ISM survey showed that manufacturing employment continued to improve in March, though at slower pace than the month before. Separate data from the U.S. Labor Department showed that new jobless claims fell by 6,000 to 439,000 last week. The department releases its closely watched snapshot of the March job market on Friday.
``U.S. manufacturers remain dependent on foreign demand. "The world has gotten smaller, and a lot of us are much more global," says Tim Sullivan, chief executive of Bucyrus International Inc., a Milwaukee-based manufacturer of mining machinery. The company, which is adding about 500 workers to its 2,500 U.S. employees, is drawing about 80% of its business from abroad, mostly Brazil, Russia, India and China. ‘
``"It's really a tale of two worlds right now," Mr. Sullivan says. "The Western Europe and U.S. economies are going to recover, but they're going to recover slowly."
``China's manufacturers are the furthest along. The factory sector there turned up in March 2009 as a big stimulus program took hold. In recent months, overseas orders started to return. The nation's exports, after shrinking for 13 months, started growing again in December, and so far this year are up 31%."
And it is more than that.
The gains in US manufacturing is seen being accompanied by rising producer prices, the same symptoms that essentially plagues China today.
In short, this is inflation rearing its ugly head-globally.
According to Business Insider,
(all bold emphasis mine)
``the ISM Manufacturing Prices index jumped 8 points in March, to 75 from 67. This signals a sharp rise in inflationary pressure. According to the ISM, 17 industries reported paying higher prices on average in March and no industry reported paying lower prices." (see chart above)
``Furthermore, the Producer Price Index (PPI) for crude materials in orange below, a rise in the ISM Prices Index makes a rise in the PPI highly likely, as highlighted by Waverly Advisors. This means we should expect more confirmation of inflationary forces in the near future."
So both signs- the recovery in the manufacturing sector and the attendant inflation- appears to gradually confirm our suspicion that today's recovery is just another facet of the intertemporal process or the ongoing gradation of the Austrian Business or Trade cycle.
Here is Mr. Ludwig von Mises,
``In issuing fiduciary media, by which I mean bank notes without gold backing or current accounts which are not entirely backed by gold reserves, the banks are in a position to expand credit considerably.
The creation of these additional fiduciary media permits them to extend credit well beyond the limit set by their own assets and by the funds entrusted to them by their clients. They intervene on the market in this case as "suppliers" of additional credit, created by themselves, and they thus produce a lowering of the rate of interest, which falls below the level at which it would have been without their intervention. The lowering of the rate of interest stimulates economic activity. Projects which would not have been thought "profitable" if the rate of interest had not been influenced by the manipulations of the banks, and which, therefore, would not have been undertaken, are nevertheless found "profitable" and can be initiated. The more active state of business leads to increased demand for production materials and for labor.
``The prices of the means of production and the wages of labor rise, and the increase in wages leads, in turn, to an increase in prices of consumption goods. If the banks were to refrain from any further extension of credit and limited themselves to what they had already done, the boom would rapidly halt. But the banks do not deflect from their course of action; they continue to expand credit on a larger and larger scale, and prices and wages correspondingly continue to rise." (bold emphasis mine)
So the answer seems to be a yes. Thereby, enjoy it while it last.
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