Global manufacturing activity has been impacted by two temporary forces, namely the US weather and the global inventory cycle

Global manufacturing activity has been impacted by two temporary forces, namely the US weather and the global inventory cycle. Nevertheless, activity seems to have stabilised in China and is improving a touch in the US and Europe. The gains in the US are likely to strengthen in the months ahead (even though economic growth is likely to moderate to below +2% in H1 2014), but the improvements in Europe are not yet strong enough to reach escape velocity with bad debts still likely to rise as unemployment is still around record high levels and public finances remain highly fragile. Meanwhile, new export growth is declining and the ECB needs to construct an equity injection into the regional banking sector to strengthen their balance sheets, so as to cease the contraction in credit, which is continuing and will prevent any sustained improvement in the region. Full overnight report here (VIEW LINK)