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World manufacturing gains but not in EU

Tuesday, July 01 17:22:29

Manufacturing activity in the United States and in Asia's industrial powerhouses China and Japan expanded further in June but euro zone growth faltered as main motor Germany slowed.

The U.S. manufacturing sector gained more momentum in June, driven by the fastest growth in output and new orders in over four years, an industry report showed today.

Financial data firm Markit said its final U.S. Manufacturing Purchasing Managers Index rose to 57.3 in June, the highest since May 2010, although it was slightly lower than the preliminary read of 57.5.

A separate report from the Institute for Supply Management showed its index of national factory activity was at 55.3, little changed from May's 55.4 reading.

The average ISM PMI was 53.9 for 2013, which turned out to be a very strong year, and the average of 2014 so far is 54 which indicates "that we are in a positive trend," Bradley J. Holcomb, chair of ISM Manufacturing Business Survey Committee, said in a conference call with reporters.

Business surveys published on Tuesday confirmed factory output expanded across Asia following months of decline in its two biggest economies, as massive stimulus packages in Beijing and Tokyo begin to take effect.

China's final HSBC/Markit Purchasing Managers' Index (PMI) rose to 50.7, above the 50 mark that separates growth from contraction for the first time in six months. The official China PMI, geared more towards bigger state-owned firms, hit a six-month high of 51.0.

"The Chinese numbers were good. The authorities are helping, they are supporting, they are guiding the economy in the direction they want it to go in," said Peter Dixon, economist at Commerzbank.

In contrast, measures announced last month by the European Central Bank to counter the threat of deflation and support growth by boosting lending have yet to show any impact.

Markit's final Manufacturing PMI for the euro zone fell to 51.8 in June from May's 52.2, the lowest reading since November.

"The ECB is going to be looking at these numbers in the coming months and hoping that we see a bit more of a pick-up. Let's check in six months' time if the ECB needs to do any more," Dixon said.

Stock markets firmed after the China data, which reinforced market views that the world's second-largest economy is steadying thanks to stimulus from Beijing.

Those measures include reserve requirement cuts for some banks to encourage more lending, quicker fiscal disbursements and hastening construction of railways and public housing. (Reuters)