The reading is the best since June and this is the
first time since August that it has climbed above 50 - the level which
separates contraction and expansion.
Economists had feared another lacklustre reading
although regional surveys in Philadelphia, New York and Chicago in
recent weeks have suggested the start of a turnaround.
The surprise boost to manufacturing follows a set of
contradictory indicators in other parts of the economy.
November had produced a healthy performance from the
service sector, as well as a slowdown in job losses after a year of mass
But consumer confidence - the engine of the US
economy throughout the recent downturn is beginning to flag, according
to one of the most closely watched surveys on the subject.
And so far, people do not seem to have been spending
as enthusiastically as retailers had hoped.
"The question at this point is whether the
manufacturing sector can continue to gather momentum during the first
quarter of 2003," said Norbert Ore, chair of the ISM manufacturing
business survey committee.
Even so, the rise in manufacturing activity overall
disclosed some encouraging pointers.
In an environment where business investment has been
muted for months, the new orders index leapt to 63.3 from 49.9 in
November, hinting at healthy activity in the months ahead.
EUROPEAN MANUFACTURERS UNDER STRAIN
The manufacturing sector in the euro zone contracted
in December, with new orders, output, and employment levels falling for
the fourth consecutive month.
The Reuters Eurozone Purchasing Managers' Index fell
to 48.4 in December from 49.5 in November, going against analysts
expectations of a 0.2 rise.
The 50 mark in the index divides growth from
Last month's decline was the steepest fall in the
eurozone manufacturing index since January last year.
"The modest recovery in manufacturing seen
earlier in the year has run out of momentum," said NTC Research,
which compiles the survey.
"The PMI was dragged down by a slowdown in
output growth to near stagnation, an increase in the number of job
losses, and the sharpest drop in new orders since January."
Europe's woes were echoed in the UK, where the
manufacturing sector shrank for the first time in five months in
December, the Chartered Institute of Purchasing and Supply said.
The US Institute for Supply Management report, which
recorded a level of 49.2 in November.
The euro zone is being weighed down by the weakness
of the region's biggest economy, Germany, the survey showed.
Germany's rating fell to 46.9 from 49.0 as
manufacturers cut jobs for the nineteenth month, while output slipped
and new orders dropped.
Export orders also fell, reflecting the strength of
the euro, which rallied 17% in 2002 to $1.03 when the survey was
French manufacturing contracted for the third
consecutive month edging down to 48.7 from 49.6 in November, while the
Italian index crept up to 51.1 from November's 51.0, after 12 months of
growth in orders.
WALL STREET BEGINS 2003 WITH A BANG
Wall Street has begun 2003 in buoyant mood, as
traders returned from their New Year break to indications that US
industry could be back on track.
The past year brought the third 12-month slide in
stock prices in a row, reflecting sluggish economic growth, weak
corporate profits, a spate of accounting scandals, and fears over war in
But by the close of business on 2 January, the
blue-chip Dow Jones industrial average was 265.89 points or 3.19% higher
at 8,607.52, less than a point off the high for the day.
The broader S&P 500 had pushed ahead even
further, up 3.32% to 909.03.
But leading the pack was the technology-rich NASDAQ
Composite, 49.34 points or 3.69% firmer at 1,384.85.
MORE GLOOM FOR UK MANUFACTURERS
The UK manufacturing sector contracted in December, a
survey has found, adding to fears that the sector is heading back into
The Chartered Institute of Purchasing and Supply's (CIPS)
latest purchasing managers' index, which provides a snapshot of
conditions in the sector, fell to 49.5 in December, down from a 50.1 the
A reading below 50 indicates that manufacturing is
CIPS said the worse-than-expected figure was down to
a "marked contraction of both employment and stocks of
purchases," and a big drop in the new orders index.
BT EXITS HONG KONG MOBILE MARKET
UK telecoms giant BT has struck a deal to sell its
stake in Hong Kong-based mobile operator SmarTone as part of its debt
The firm has agreed to sell its 21% share of SmarTone,
Hong Kong's third biggest mobile operator, to property developer Sun
Hung Kai Properties for about HK$1bn (£84m; $132m).
The sale price is about a third of the sum that BT
paid for its stake in the Hong Kong firm three years ago.
The deal is the latest in a round of overseas asset
disposals launched two years ago by BT in an effort to pay off its
debts, which at the time approached £30bn.
UK PETROL PRICES RISE
Supermarket chain Safeway has become the second major
petrol retailer to raise its prices, in a sign that British motorists
will face higher fuel bills in the New Year.
Safeway said it would put up pump prices by an
average of 2p per litre from 1 January, taking the average price of a
litre of unleaded to 74.9p.
The move came after petrol retail giant BP confirmed
it was increasing petrol prices by 1p to an average of 74.8p a litre.
The higher pump prices reflect a sharp jump in the
price of crude oil amid fears that a US-led war against Iraq could
disrupt fuel supplies from the Middle East, the world's biggest oil
BRAZIL BEGINS BALANCING ACT
As Brazil's new government began its tasks, the man
in charge of the money has set himself the difficult challenge of
keeping both the rich and the poor happy.
Speaking the day after Luiz Inacio Lula da Silva took
over the Presidency, at a massive ceremony in the capital Brasilia, new
Finance Minister Antonio Palocci passionately dedicated himself to
fighting Brazil's endemic poverty.
TURKEY PUSHES FOR CYPRUS DEAL
Turkey has signalled its determination to end the
30-year stalemate over the divided island of Cyprus.
The head of Turkey's governing party sharply
criticised Turkish Cypriot leader Rauf Denktash in a television
interview, urging him to negotiate to reunite the island.
WAR TALK THREATENS SOUTH KOREAN GROWTH
The threat of war over North Korea's nuclear
programme is the biggest threat to South Korea's economy in 2003, the
head of the central bank has warned.
"The North Korean nuclear issue is the biggest
problem as it may check the economic growth (of South Korea)," said
the central bank's governor Park Seung.
The Bank of Korea's growth target of 5.7% would be
threatened if tensions escalated too far and the economy could even
US BANK SETTLES ENRON CLAIMS CASE
JP Morgan Chase has agreed a multi-million dollar
settlement with 10 insurance firms that it was suing over contracts with
disgraced energy firm Enron.
The insurers had provided guarantees for contracts
between Enron and Mahonia, an offshore unit of JP Morgan Chase, the
second biggest investment bank in the United States.
JP Morgan was suing the insurers for a total of $1bn
(£600m) for guarantees on Enron's future oil and gas trades.
Enron filed for bankruptcy a year ago, voiding its
future energy trading contracts.
DENMARK TO HOLD SECOND EURO VOTE
Danish Prime Minister Anders Fogh Rasmussen has said
his country will hold a new referendum on euro membership, despite the
fact that the proposal was rejected in 2000.
THAILAND IN EARLY LOANS PAY-OFF
Thailand plans to repay the outstanding $4.8bn of a
bail-out loan from the International Monetary Fund (IMF) and other
lenders early in an attempt to cut interest costs and improve its image
among foreign investors.
UNION UPS EURO PRESSURE
Britain's second-biggest trade union, Amicus, has
called for the UK to join the single European currency sooner rather
Amicus said most of its 1.1 million members would
vote in favour of the euro if there was a referendum now.
NEPAL TOURIST NUMBERS FALL
The authorities in Nepal have reported a big decline
in the number of tourists visiting the country.
The number went down by more than a quarter in 2002.
HOUSE PRICES 'UNLIKELY TO CRASH'
The UK's house prices rose by 25% in 2002 and are set
for further rises this year, according to the Nationwide building
Nationwide, which produces one of the country's
leading house price indices, said the average house price rose by 1.7%
in December to £117,206.
SINGAPORE AVOIDS DOUBLE-DIP RECESSION
Singapore's economy has narrowly missed a double dip
recession, after reporting 0.1% annualised growth in the fourth quarter.
There is expected to be little improvement in the
coming six months for Asia's most export-dependent economy.
The central bank, the Monetary Authority of Singapore
said the economic outlook "has become less favourable since
CHINA PLANS MANNED SPACE FLIGHT IN 2003
Shenzhou IV blasted off from the Gobi desert on
Monday China hopes to launch its first manned spacecraft later this
year, a senior official has said.
This would make it only the third country to put
humans into space.
Shanghai aerospace centre director Yuan Jie said the
project had already entered the overall assembly and testing phase.
The launch would take place in the second half of
2003, he said.
US CONSUMERS LOSE FAITH
Consumer confidence in the US slumped in December,
adding further gloom to the outlook for the US economy.
The Consumer Confidence Index dived to 80.3 in
December from a revised 84.9 in November, according to data from an
influential business lobby group, the Conference Board.
The figure was in stark contrast to analysts'
forecasts of a slight rise to 85.5, and was the sixth fall in the past
GERMANY BANKS ON DRINKS DEPOSIT
A new law has come into effect in Germany which makes
cans and bottles subject to a refundable levy.
The measure - which has been championed by junior
coalition partner Green Party - is aimed at discouraging the use of
materials which harm the environment.
Under the new law, Germans have to pay an extra 0.25
Euros on most canned and bottled drinks.
In order to get the money back on the deposit,
customers have to keep the original receipt for the goods which they
DHAKA BANS POLLUTING 'BABY TAXIS'
The government of Bangladesh has banned thousands of
two-stroke three-wheelers, sometimes known as baby taxis, from the
streets of Dhaka. The authorities argue that smoke from the machines
reduces air quality.
EURO STAGES ANNIVERSARY REBOUND
The euro has ended its first year as a cash currency
at its highest level for more than three years, as fears of a US war
against Iraq undermine the dollar.
One year after Europeans handled their first notes
and coins, the euro climbed from $0.8899 on 1 January to reach $1.050 at
US BANKRUPTCIES BREAK RECORDS
For the second year in a row, the aftermath of the
stock market bubble of the 1990s has pushed US corporate bankruptcies to
The combination of massive accounting fraud and the
free spending of the past decade has brought down a string of household
names in the past year, including five of the 10 biggest collapses on
record. The 186 public companies that went bust had a massive $368bn in
assets, dwarfing last year's record $259bn.
SAMSUNG INVESTS IN TOP-END CHIPS
Samsung Electronics has announced a major investment
in its memory chip business.
Samsung said it will invest 1.5 trillion won ($1.2bn;
£745m) in building new semiconductor facilities next year.
Samsung's strategy is to see off a downturn in the
semiconductor industry by stepping up its investment in top-of-the-range