Source: Markit Economics

At 56.1 in January, up from 54.6 in December, the JPMorgan Global Manufacturing PMI (Purchasing Managers' Index) registered its highest reading for five and-a-half years. The latest improvement in overall operating performance reflected accelerated growth of production and new orders, while a slight gain in staffing levels was signalled for the first time since March 2008.

Manufacturing production increased for the eighth successive month in January, with the rate of expansion hitting a 69-monthhigh. The improvement in the performance of the US manufacturing sector was most noticeable. The ISM output index rose by 6.5 points since December to reach its highest level since April 2004. Rates of expansion reached 69-, 16-, 26- and25-month highs in China, India, Taiwan and South Korea respectively.

Western European and Japanese manufacturing also showed further signs of improvement at the start of 2010, but rates of expansion were below the global average. Growth of output was the strongest for almost two-and-a-half years in the euro area. Solid expansions in output were recorded in France, Germany, Italy, the Netherlands and Austria, but these were in marked contrast to the deeper recessions in Spain, Ireland and Greece. UK manufacturing production rose to the greatest extent for 43months, while growth in Japan remained solid.

Global manufacturing new orders increased for the seventh straight month in January. Moreover, the rate of expansion was the quickest since May 2004. Almost all of the countries for which January data were available reported higher new order books. The exceptions were Spain, Ireland and Greece. The strongest gains in new work received were seen in the US (61-monthhigh), Taiwan (fastest since October 2007), India (17-month high) and China (69-month peak).

Rising further from the record low posted in December 2008,the Global Manufacturing New Export Orders Index hit a five and-a-half year high in January. Taiwan, India, the US, China, the Netherlands and the UK recorded the sharpest growth.

Manufacturing employment rose slightly for the first time in 22months in January. Amongst the major industrial regions covered by the survey, jobs were created in the US, China and the UK, but cut in the Eurozone and Japan (with both the euro area and Japan seeing accelerated reductions in staffing).

Having gained 10 points over the past two months, to reach 63.4in January, the Global Manufacturing Input Prices Index posted its highest reading since August 2008. Higher purchasing cost sreflected increase commodity prices and supply-chain factors.

Commenting on the survey, David Hensley, Director of Global Economics Coordination at JPMorgan, said:"According to the global PMI data, the world manufacturing sector started 2010 on a robust footing. Growth of production and new orders gained traction and were the fastest since mid-2004,while manufacturing employment increased for the first time since March 2008. The current phase of the recovery looks to still have significant momentum and an elevated orders-to-inventory ratio suggests growth will continue in the months ahead."

The Global Report on Manufacturing is compiled by Markit based on the results of surveys covering over 7,500 purchasing executives in 29 countries.