Manufacturing hits two-year high

ONE measure of manufacturing activity recorded a positive reading last month for the first time in more than two years.

This came as separate figures revealed pension funds delivered a strong return last month thanks to the strong performance of international equity markets.

The NCB purchasing managers index jumped to 53 from 48.6 in February. That’s the first reading above 50, which signals growth, in 28 months.

An index of new orders rose to 56.2 from 48.2, the highest since September 2007. However employment in manufacturing continued to fall, according to the survey.

New export orders jumped ahead at the strongest rate since the survey began in 1998.

NCB economist Brian Devine said: “The most encouraging thing about this month’s survey was that panelists indicated that demand had strengthened in domestic as well as foreign markets.” He said there is evidence the domestic market may also have bottomed.

NCB believes the economy bottomed out in December and January and predicted expansion in gross national product (GNP) before the second half of 2010. GNP is expected to rise by 2.8% next year.

However, NCB did say that net job creation is not expected to return until 2011 with the consequent drag on consumption.

It said construction investment will be “severely curtailed” due to oversupply and Government spending will be retrenching in response to the fiscal situation.

“In short, in 2010 expect extremely weak domestic demand to counterbalance a large contribution from net exports on the back of global reflation,” said Mr Devine.

Meanwhile, the Hewitt Managed Fund Index returned 5.8% for the month of March, with the average return on managed funds for the year to date now at 6.2%.

Investment consultant at Hewitt Brian Delaney said: “March marked the one year anniversary of the stock market recovery. The Hewitt Managed Fund Index has returned 35.3% over the last 12 months.

“The main driver of the return in March was the strong performance of international equity markets. Investors are responding to positive data from the US, particularly consumer spending, which has improved over the last five months.”

He said the next test will be how markets react to the withdrawal of liquidity measures by governments and central banks.

“China and India have already taken steps to reduce liquidity in an effort to curb inflation,” he said. “There will also be continued focus on the debt of the weaker European countries.”

Figures from the US also showed that manufacturing expanded in March at the fastest pace since July 2004, indicating factories will be a source of strength for the US recovery in coming months.