The December production survey and the January manufacturing PMI confirm that the industrial sector at least began 2011 strongly. However, much of the new output is simply being added to inventories, and the rebound is still export-led. The pick-up will therefore not be sustained if, as we expect, the global recovery disappoints later this year. In the meantime, the rebound in manufacturing is likely to be more than offset by continued weakness in (domestic-oriented) services.
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