A worker performs a quality test on automobile parts at a factory in Ludhiana, in the northern Indian state of Punjab on Jan. 18, 2012.
A worker performs a quality test on automobile parts at a factory in Ludhiana in the northern Indian state of Punjab. Data from numerous research organizations show nearly every major global economy in January experienced either faster expansion or slower contraction of manufacturing than during the previous month. REUTERS/Ajay Verma

From the gargantuan aircraft-assembly hangars in Wichita, Kan., to the high-tech semiconductor-production floors of Hsinchu City, Taiwan, to the machine-parts factories in Frankfurt, Germany, to the steel foundries in Jharkand, India -- worldwide manufacturing kicked off the new year in high gear.

Data from numerous research organizations show that nearly every major global economy saw positive momentum in manufacturing during January, and each one experienced either increasing growth rates or slowing contraction rates.

Manufacturing is actually performing a lot better than what people expected, said Rob Dobson, a senior economist at Markit Economics, which releases a survey of global manufacturing on the first business day of every month. An index in that survey, sponsored by New York-based JPMorgan Chase, rose to a seven-month high of 51.2 in January, after it had plunged beginning in August of 2011.

Any reading over 50 in Markit's survey index indicates expansion. Last month's positive reading followed one in December that showed only marginal expansion, and December was preceded by four consecutive months of contraction.

'Quite a Positive Spirit'

Better-than-expected results from China and the United States, which account for 36 percent of global manufacturing, were the main drivers of global growth in January.

There was quite a positive spirit in the U.S. data, Dobson said, noting that continued momentum in China is among the other things that have helped as well. There was talk about the potentiality of China having a hard landing at some point in 2012, and we haven't seen that come about.

The benchmark manufacturing index for the United States, released monthly by the non-profit Institute for Supply Management, climbed to 54.1 in January, up from 53.1 in December, as new orders and exports increased. Like the Markit survey index, a reading of higher than 50 indicates expansion.

Meanwhile, the state-affiliated China Federation of Logistics and Purchasing index rose slightly to 50.5, from 50.3, in December. Chinese manufacturing contracted in November for the first time since early 2009. Also, Chinese input prices for raw materials declined, suggesting that inflation -- a major concern for Chinese technocrats -- has been tamed.

The results showed a gradual stabilization of the Chinese economy,'' Zhang Liqun, an analyst for the Federation, told the Associated Press.

But it wasn't just Chinese and U.S. manufacturing that were on the upswing. Among other examples:

  • Continental Europe. The Eurozone Manufacturing PMI, also released by Markit, rose for the second month in a row in January, to 48.8, a five-month high that indicated that the rate of contraction in manufacturing across the Continent is now only marginal. Those results were well above analyst's expectations. The index would have likely shown expansionary momentum had it not been for steeper industrial declines in France and Ireland and catastrophic numbers from Greece, which dragged down solid gains in Germany and Austria. Chris Williamson, chief economist at Markit, even suggested the numbers implied that Europe may avoid a slide back into recession, particularly as an upturn in the ratio of new orders to warehouse stocks points to increased production in coming months.
  • Asia. Economic powerhouses Japan and South Korea both saw their manufacturing PMIs rise substantially, with the Japanese index indicating the second consecutive month of expansion and the Korean figure reflecting a much-decreased rate of industrial contraction. The results came despite recent flooding in Thailand that affected the supply chain last month for several manufacturing-focused industries, such as auto-making.
  • The United Kingdom. The index produced by Markit and the Chartered Institute of Purchasing and Supply revealed growth for the first time in five months, and it also noted easing cost pressures. The UK manufacturing sector has sprung to life in the first month of 2012 to defy any economic gloom, CIPS chief executive David Noble said in a statement at the time of the index's release.
  • Brazil and India. Two of the most important emerging economies showed notable manufacturing growth, even in the face of costlier manufacturing inputs. The Brazilian index turned positive for the first time since May of last year, and the Indian index rose to 57.5, the second-highest reading, after Denmark, of any economy surveyed.

Inflation, Employment

The recent reports on manufacturing also shared a similar story line in terms of other economic data points, with results that were widely seen as positive. Excluding Japan, global input prices decreased, seemingly suggesting that raw material price inflation is controlled at the global level. Factories also hired more workers around the world for the second month in a row.

The drop in global input prices helped increase manufacturing margins in the United States, China and parts of the EU. Even in places that did not follow the deflationary trend, like India and Turkey, readings seemed to indicate that inflation had likely reached a peak.

The special case of Japan, which did see significant price inflation, does not constitute a long-term negative. Prices have been rising since the March 2011 earthquake and tsunami.

We view the global PMI as providing a clear view of the underlying path of global input price growth away from the shock, David Hensley, global economist at JPMorgan Chase, said.

With most economies reflecting a second consecutive month of improvement, hiring also picked up. Factories in the United States added 50,000 jobs in January, many in the aerospace sector.

Keith Lawing, executive director of the Workforce Alliance of South Central Kansas, had forecast the longevity of his region's aerospace manufacturing in early January. At the time, he said the closure of a Boeing plant in Wichita, while kind of a big deal here, would not necessarily stop momentum in an industry poised for a rebound.

We are the air capital of the world. We take much pride in that, Lawing said. I think the jobs are going to be there for those laid off by Boeing.

Flies in the Ointment?

In nearly every country for which a PMI was calculated, the growth rate for all new orders exceeded the rate at which international orders increased. This was particularly worrisome for the export-heavy manufacturing sectors of Russia and Canada, which broke the global trend by showing less heady gains in production than those made during December.

The Canada slowdown was a bit more of a surprise, Dobson, the Markit senior economist, said, adding that it might be that what we've seen is more of an export slowdown.

Craig Wright, chief economist at the Royal Bank of Canada, which sponsored the Canadian PMI series, put the blame squarely on Europe for the situation.

Canada's modest recovery may be jeopardized if European policymakers fail to contain the sovereign debt crisis, Wright said in a statement.

Uncertainties about the Eurozone, as well as the lack of sequential growth in manufacturing, have left many hesitant to call the January data a trend.

The underlying trend has become much more difficult to define. Things are very bumpy, Dobson said. Output measures are signaling expansion one month, contraction [the] next month. I think what you're finding is [that] the reaction to positive news or negative news is much more severe than what it used to be.