Global Factory Activity Gets Trump Trade Jump-Start Amid Dollar Surge

Manufacturing activity around the world received a solid boost from President elect Donald Trump's surprise November win as a strong US dollar helped lift export sentiment and support factory output. 

A series of benchmark Purchasing Managers Index data published Thursday from Japan to the United Kingdom suggests the U.S. dollar's 3.2% November surge - which helped lift the greenback to its highest level in 14 years earlier this month - is providing an added kick-start to the global manufacturing sector.

The figures offer evidence that companies are tooling-up to take advantage of Trump's promised fiscal stimulus, tax cuts and looser Wall Street regulation by manufacturing goods in local currencies and selling them into an economy riding on the wave of increased purchasing power, higher wages, falling unemployment and buoyant consumer sentiment. 

Factories in China, for example, are rolling to their best quarterly run in at least three-and-a-half years with a solid November reading of 50.9 for the IHS Markit Caixin General Manufacturing PMI. That data followed a similarly robust score of 51.7 from the country's official statistics office, the highest since July 2014.

In Japan, a modest dip in factory gate activity was offset by solid new order flow as managers bet the weaker yen, which fell 7% against the dollar last month, the most since 2009, will boost exports. The Markit/Nikkei November PMI slipped 0.1 points to a seasonally-adjusted 51.3, well above the 50 level that separates economic growth from contraction.     

The momentum continued in Europe, where manufacturing activity in the single currency area clicked at its fastest pace in nearly three years, with the IHS/Markit PMI for the sector rising to 53.7. Only U.K. data bucked the trend, as the pound's 20% post-Brexit slump sent input costs surging and slowed November factory activity 0.8 points to 53.4.

"The concern is that higher costs may in time offset any positive effect of the weaker exchange rate, especially given that export order book growth has already waned markedly from September's fiveand-a-half year high," said Markit's Rob Dobson. 

The collective figures provide some support for both surging equity prices around the world and forecasts for global economic growth. Earlier this week, the Organisation for Economic Co-operation and Development (OECD) lifted its estimate for 2017 to 3.3% and pegged the 2018 advance at 3.6%.

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