What's going on?
Fresh data released on Friday suggested China’s manufacturing sector might be in better shape than feared – and that was a helping hand to build stocks up around the world.
What does this mean?
Friday’s data came from an independent survey focused on industrial activity. Unlike China’s official data, which painted a bleak picture of the sector shrinking last week, this survey covered a greater proportion of small and mid-sized companies. And while still reporting a shrinking manufacturing sector, the survey suggested it’s not quite as bad as thought – in part because smaller respondents are more likely to have benefited from a recent government-sanctioned increase in lending (tweet this).
In the US, survey data covering its manufacturing sector showed on Friday that activity had slowed to the lowest level in 18 months – although it is still growing. That’s perhaps not surprising considering the slowdown in the US economy late last year and early this.
Why should I care?
The bigger picture: The UK’s alright – for now – but Europe’s manufractured.
Yet more data released on Friday showed that the UK’s manufacturing sector, while expanding in February, did so at the slowest pace in four months. One reason for growth was factories stockpiling goods ahead of Brexit, after which imports might become more expensive. But demand today probably means less tomorrow – all else equal, UK manufacturers won’t need as many products in months to come. Friday’s data also showed that manufacturing in the eurozone declined last month for the first time since 2013 – and Germany was largely to blame.
For markets: China adds value.
Chinese stocks rose on Friday thanks to the survey, which also helped to buoy stocks in Europe and the US by suggesting a stronger global economy. One of the highest risers was retailer Gap: its shares rose 16% after announcing plans to split off its fast-growing Old Navy brand into an individual company, unencumbered by the low sales growth and profit margins at its much older parent.