U.S., Global Economy See Pickup as Services Revive and Factories Ramp Up -- Update
April 23 2021 - 11:28AM
Dow Jones News
By Paul Hannon and Gwynn Guilford
The U.S. and global economies are showing signs of stronger
growth as factories continued to boom and service businesses began
to see the benefits of vaccination programs.
After a big contraction in 2020, the global economy is forecast
to rebound strongly this year as vaccination programs allow more
parts of the services economy to reopen fully. There were already
signs of that rebound in the U.S. and China during the early months
of the year, but surveys of purchasing managers released Friday
indicate that Europe is also starting to participate in the
recovery.
Threats to the recovery remain, not least the possibility that
new variants of the Covid-19 virus will prove more resistant to
vaccinations and more easily transmitted. Restrictions on activity
remain in many parts of the world, and India Thursday reported the
world's biggest ever single-day jump in new infections.
Data firm IHS Markit said its U.S. services index jumped to
63.1, up from 60.4 in March -- the highest reading since data
collection began in 2009, signaling the swiftest pace of expansion
in at least 11 years. Services companies reported surging growth in
new business, buoyed by stronger client demand and relaxing of
restrictions.
U.S. manufacturers reported an upswing in April activity despite
struggles to source raw materials, which drove up backlogs,
according to surveys carried out by IHS Markit. The purchasing
managers index for the U.S. factory sector climbed to 60.6 so far
this month, up from 59.1 in March.
"The U.S. economy is enjoying a strong start to the second
quarter, firing on all cylinders as loosening virus restrictions,
an impressive vaccine rollout, a brighter outlook and stimulus
measures all helped boost demand," said Chris Williamson, chief
business economist at IHS Markit.
Many countries in Europe retain restrictions on services that
require close physical proximity and on most forms of international
travel. But the surveys recorded the first expansion of activity in
its dominant services sector since August 2020, while its
manufacturing sector continued to enjoy strong growth.
The eurozone economy likely contracted in the first three months
of the year, reflecting still high infection rates and a slow start
to vaccination programs. But the April survey points to a return to
growth in the second quarter.
Businesses appear to be preparing for a pickup in activity, with
purchasing managers reporting the strongest new hiring since
November 2018, driven by factories that saw new orders rise at a
record pace.
There are continuing signs that the pace of the global
manufacturing recovery was straining supply lines, which may prove
to be a drag on growth. In the eurozone, businesses reported the
largest rise in waiting times for delivery of supplies in the
survey's 23-year history, while the prices they paid for their
inputs rose at the fastest pace in a decade.
Although Europe's vaccination drives have been beset with supply
hiccups and worries over side effects, they have picked up pace in
recent weeks and that has made households more hopeful about their
prospects. A separate survey by the European Commission released
Thursday found that consumer confidence hit a pandemic high in
April after a surprisingly sharp rise from March.
In contrast to much of the rest of Europe, the U.K.'s
vaccination drive has kept pace with that of the U.S. That has
spurred optimism among businesses and households that the country
will be able to reopen the large parts of its economy that have
been frozen over much of the past year by the end of June.
Some restrictions were lifted in April and that had an immediate
impact on growth, with the survey of purchasing managers recording
the strongest increase in activity since November 2013.
The surveys also pointed to a pickup in Japan, where activity in
the services sector has also been subdued. Indeed, the composite
Purchasing Managers Index for the country -- which measures
activity in the services and manufacturing sector -- rose to 50.2
in April from 49.9 in March, pointing to an expansion for the first
month since the pandemic struck.
However, a full reopening of the economy remains many months
away. The government Thursday said it would re-establish a state of
emergency on Sunday in Tokyo and other major cities after crowds
came back to urban centers and infections surged again. the
emergency in Tokyo, Osaka, Kyoto and the prefecture that includes
Kobe would last for 17 days, until May 11, covering the Golden Week
holidays in the first week of May.
Australia has contained the pandemic more tightly than Japan and
Europe, and the surveys point to strong growth in its economy
during April. The composite PMI rose to 58.8 from 55.5 in March,
the highest reading since the series began in 2016.
Write to Paul Hannon at paul.hannon@wsj.com and Gwynn Guilford
at gwynn.guilford@wsj.com
(END) Dow Jones Newswires
April 23, 2021 11:13 ET (15:13 GMT)
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