Daily Brief: Economists Toast Record Levels Of Manufacturing As Global Growth Turns A Corner

Daily Brief: Economists Toast Record Levels Of Manufacturing As Global Growth Turns A Corner

almost 3 years ago3 mins

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Raise a glass to the global manufacturing industry: it put on its hard hat and went to work in March, according to fresh survey data out Thursday.

What does this mean?

Monthly business activity surveys ask managers how busy they’ve been compared to the month before, giving economists a near-real-time picture of how the economy’s doing. And the eurozone’s doing well, or at least it was before this week’s latest lockdowns: its overall economic activity increased in March for the first time since September. That was largely down to its manufacturing industry’s highest-ever activity levels, with Germany a particularly standout performer.

Eurozone PMI

Manufacturing updates from the UK and US weren’t to be sniffed at, either: British factory activity grew at a faster pace than expected last month, while Stateside figures hit their highest since 1983.

US PMI

Why should I care?

For markets: Global growth is getting it together.

When the world’s major economies are all heading in the same direction and happily buying and selling among one another, growth’s said to be synchronized – and momentum builds up. Just as well, then, that China’s singing from the same hymn sheet: its manufacturing activity data – out earlier this week – was ahead of economists’ expectations. That might help explain why the International Monetary Fund is set to increase its global economic growth forecasts next week.

Zooming in: Believe the hype, but not too much.

Economic activity surveys focus on a single month, but they’re arguably better at gauging economic activity across several. That’s partly because the surveys only show the number of firms reporting higher, lower, and unchanged activity, and not the extent of any changes. But the issue is easily solved: a moving average that puts more weight on recent data should better reflect the reality behind the headlines.

Keep reading for our next story...

Atos's Shares Fell After The Company Revealed Accounting Errors

Atos image

French tech company Atos announced on Thursday that auditors had found two teensy-weensy accounting errors – and its stock price plummeted.

What does this mean?

Accountants regularly check a company’s financial statements to make sure it isn’t misleading investors. Most of the time everything is perfectly fine, but at Atos they uncovered a nasty surprise. There were several mistakes relating to how two of Atos’s US units – which together contributed 11% of the company’s total sales last year – reported revenue from customers.

While this wasn’t quite the $2 billion black hole auditors discovered at payments processor Wirecard last year, and Atos was quick to point out the errors weren’t “material”, the damage had already been done. Investors understandably hate any uncertainty around the trustworthiness of a company’s numbers: they sent Atos’s shares down 12%.

Atos stock
Source: The Wall Street Journal

Why should I care?

For markets: Accounting errors = potential bubble trouble.

A few shoddy figures could herald bigger problems for investors: recent analysis from investment bank Goldman Sachs suggests that accounting scandals have historically been a sign of market bubbles a-brewing. Still, it may be a little too soon to sound the alarm and break out the pitchforks: Goldman admits scandals can emerge at any time, and there isn’t yet enough evidence across eight other bubble indicators to show stocks are in imminent danger.

The bigger picture: Everyone’s making deals but Atos.

Atos’s shares had already been trending down since talks to buy US rival DXC Technology collapsed in February. Combined, the company could’ve become a cloud and consulting giant better able to compete with the likes of SAP and Accenture. Investors, however, thought it was too much for the deal-hungry company to take on. What may now be rubbing salt in Atos’s wounds is the fact that acquisition activity among other companies climbed to a two-decade high last quarter.

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