The global private sector economy boomed at its fastest rate in 15 months in October, providing ample fuel for central banks to ratchet up warnings of rising inflation and the need for higher interest rates.
Monthly surveys of thousands of companies in the major economies of North America, Europe and Asia indicated a sharp rebound in activity last month.
Manufacturers steamed ahead at their fastest rate in 13 months. Service sector firms signalled they were at full tilt again, aided by a sharp recovery in the United States after a September stutter caused by hurricanes and soaring fuel costs.
With activity at full blast and the cost of energy and raw materials still high, the rising threat of inflation is holding the attention of increasingly hawkish central banks world-wide.
"Policymakers cannot be complacent," Federal Reserve Vice Chairman Roger Ferguson told a conference in Washington.
"Central bankers must reinforce their credibility and validate the confidence of market participants by actively leaning against the inflationary pressures long before inflation itself builds," he added.
The Fed announced its 12th quarter-percentage-point rate increase since June last year on Tuesday, bringing its key lending rate up to 4 percent from a starting low of 1 percent.
Financial markets expect even tighter credit as the Fed warned of the "cumulative" impact of energy price increases.
Earlier in Frankfurt, European Central Bank President Jean-Claude Trichet also signalled the ECB was closer to raising its key short-term rates from 2 percent, where they have been for more than two years.
"We can move at any time, and we have warned the market very clearly of this," Trichet said. "Strong vigilance is of the essence in our eyes, and we clearly see increased risks to price stability."
"As regards to a pre-emptive strike, any central bank would not consider it advisable to wait for inflation to materialise," Trichet added.
Financial futures markets are betting there is a 60 percent chance of an ECB rate rise as soon as next month.
BUOYANT WORLD ECONOMY:
All indications from the private sector economy across the world are that business activity is strong enough to take a tightening of credit conditions, which central bankers worry are too loose and are fuelling unsustainable asset bubbles.
A global Purchasing Managers Index, compiled by JPMorgan from surveys of 10,000 executives at factory and service firms in more than 20 countries, rose 3.6 points in October to 58.4.
That is the highest since July 2004 and far above the 50 level separating expansion from contraction.
This is "further evidence that the world economy is handling the assorted natural disasters and August/September energy price shock very well," said David Hensley, head of global economics co-ordination at JPMorgan.
Although the global input price index dipped to 66.3 from 66.5, it continues to signal rapid gains in raw materials prices and all this weeks surveys showed signs that firms were starting to pass on some of those prices rises to customers.
Hensley said the global PMI was consistent with 4 percent annualised growth in global gross domestic product. That is just shy of the International Monetary Fund's 4.3 percent world growth forecast for this year and next.
That acceleration in growth also mirrors the pulse seen in leading indicators monitored by Goldman Sachs, which said its Global Leading Indicator rose for the fifth consecutive month in October to 2.7 percent from 2.6 percent in September.
World stocks have rallied 4.5 percent from mid-October lows and are now back within a whisker of 5-year highs set early in that month.
Credit markets, meantime, are taking their cue from the price pressures and central bank warnings. Both US and euro zone 10-year borrowing costs have rise about a third of a percentage point since the beginning of October.
BUSINESS BOOMS WORLD-WIDE:
Aiding the renewed surge in global business optimism has been a retreat in world crude oil prices, which have retreated some 13 percent from late August's record peak.
The strong post-hurricane recovery in the US service sector, where the Institute for Supply Management's index jumped almost seven points to 60.0 last month, mirrors building momentum around the globe in recent months.
European service sector surveys, published on Thursday and covering companies from airlines to insurance brokers and hotels, showed business grew at the fastest pace in 15 months in the euro zone and with unexpected resilience in Britain.
The UK survey added to a list of strong data that has dampened expectations of a further rate cut after the Bank of England reduced interest rates to 4.5 percent in August.