Leading indicator signals from China and Europe suggest positive developments in 2013.
China’s Purchasing Managers Index is moving higher, and the manufacturing sector is growing again, as anticipated. Stimulus spending and an easing of monetary policy are having a positive impact on the economy. In addition, industrial profits and fixed-asset investments are improving.
We never feared a recession in China, but it is gratifying to see that the world’s second-largest economy is set to expand in 2013. Expansion in China in 2013 will be helped by economic growth in the US next year, and it should help stabilize the situation in Europe.
The good news is not just from China.
Europe is showing some signs of life in its leading indicators. Stability and eventually marginal improvement are projected for Europe in 2013. Spain formally requested a bailout from the EU to recapitalize its banks. Stability in Spain’s banking system is a necessary precursor to the economic stability anticipated for Spain and all of Europe in 2013. The aid is expected to reach Spain on December 12. The move is not a surprise, but it does carry some heavy austerity provisions that will help Spain in the long run.