Purchasing manager surveys from the US, China and the Eurozone area indicate that manufacturing activity picked up momentum at the start of 2013 with purchasing managers indices reaching 22, 24 and 10 month highs respectively. Manufacturing activity continues to contract in the Eurozone area, remaining below 50 for the past 18 months.
In the Eurozone, despite rising input prices, cost inflation was at its lowest level for four months. This comes despite the sharpest rise in supplier lead times for 18 months Similarly, in the US cost price inflation continued to ease from its November peak. Markit report that iron, steel and packaging were most commonly reported by manufacturers as having increased in price. In contrast, Chinese input cost pressures increased at a faster rate but remain subdued.
The resurgent PMI’s may lead to an increase in commodity prices and hence higher input prices in a few months time. The chart below shows the HSBC China PMI against LME copper pointing to an increased likelihood of higher copper prices in coming months.
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