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Global Economy Moving at Two Speeds as Factories Thrive

Global Economy Moving at Two Speeds as Factories Thrive

Factories in Europe and Japan reported a faster pickup in activity during February, even as service providers saw deeper declines, reflecting the incr

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Factories in Europe and Japan reported a faster pickup in activity during February, even as service providers saw deeper declines, reflecting the increasingly selective impact of the Covid-19 pandemic on global economic activity.

High infection rates at the turn of the year prompted governments in Europe and Japan to impose fresh restrictions on individuals and businesses. But in contrast to the early months of the pandemic, manufacturers have continued to recover, even as businesses offering services that traditionally require close physical proximity have seen fresh contractions.

February surveys of purchasing managers indicate that divergence became more pronounced, particularly for economies such as Japan and Germany that have long been big exporters of manufactured goods.

The strength of factory output augurs well for the speed of the global economic recovery later in the year, when vaccination programs that are already under way should enable those parts of the services sector that are now closed or severely restricted to recover.

“Assuming vaccine rollouts can boost service sector growth alongside a sustained strong manufacturing sector, the second half of the year should see a robust recovery take hold,” said Chris Willaimson, chief business economist at IHS Markit , which conducts the surveys of purchasing managers.

This post first appeared on wsj.com

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