Stocking up for Christmas
With global industrial confidence jumping to a two-year high in October, the recovery in global manufacturing, heralded by our inventory analysis in the spring, appears to be underway.
The clocks have gone backwards. It’s getting colder. The carol singers are not out yet, but Christmas is surely coming. The elves should be busying themselves in Santa’s workshop, preparing presents to stuff into our children’s stockings, while we all stuff ourselves with chocolates.
Economic data readings are adjusted for these regular seasonal patterns in production and consumption (reindeer jumper sales always jump at Christmas). So it’s encouraging that global industrial confidence jumped to a two-year high in October, moving back in line with its long-run average.
This follows the improvement in our manufacturing lead indicator in the spring. We noted at the time (‘Kickstart the kitkat machine’) that manufacturers' inventories were falling for the first time in two years. This implied that companies were selling more things than they were producing, heralding a recovery in output ahead.
With global consumer confidence merely in line with its long-run average and global capex still weak, it’s unclear how much further industrial confidence will rise.
But as official industrial production data move from weak to normal, that could provide some festive cheer to financial markets and central bankers.