June 1, 2011 / 10:18 AM / 6 years ago

GLOBAL ECONOMY-World factory growth slips, U.S. hiring weak

 * U.S. manufacturing index lowest since September 2009
 * China PMI at nine-month low, still shows growth
 * PMIs signal slower factory growth globally
 * Factory cost pressures are easing
 (Adds U.S. data, global manufacturing data, fresh analyst
quotes)
 By Lucia Mutikani and Andy Bruce
 WASHINGTON/LONDON, June 1 (Reuters) - Global factory growth
eased in May, with the slowdown in activity more pronounced in
the United States, feeding fears the world's main economic
engines are cooling fast as richer countries cut orders.
 Purchasing managers indexes (PMI), which measure the
activities of thousands of factories across the world, dropped
to multi-month lows in the United States, China and Europe,
reports showed on Wednesday. In the euro zone, even regional
pacesetters France and Germany showed fresh signs of sagging.
 The pace of factory activity in South Korea, India and
Taiwan also eased, the surveys showed.
 "The global economic recovery has down-shifted, it has now
entered into a much slower pace," said Bernard Baumohl, chief
global economist at The Economic Outlook Group in Princeton,
New Jersey. "Much depends on what happens with China, fuel
prices and certainly food prices."
 Though some slackening had been expected as quake-and
tsunami-damaged Japan struggled to churn out parts for the
automotive and high-tech industries, economists said the
slowdown also reflected anemic growth and consumption in the
United States and Europe.
 Government data showing a decline in China's new export
orders suggested demand was weakening as the country's biggest
export destinations -- Europe and the United States -- grapple
with slowing economic growth.
 Global manufacturing eased sharply in May to its lowest
level since last September, according to the JPMorgan Global
Manufacturing PMI. The index fell to 52.9 in May from 55.0 in
April, though it held above the 50 mark that divides growth
from contraction.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
 For a graphic comparing global factory PMIs, click:
r.reuters.com/reb89r
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 FACTORY ACTIVITY SLOWS
 While data out of China suggested only a slowdown in growth
there, U.S. data raised deeper concerns about the pace of
recovery in the world's largest economy.
 The Institute for Supply Management's U.S. index of
national factory activity fell to 53.5 -- the lowest since
September 2009 -- from 60.4 in April. Still, factory activity
has expanded for 22 months.
 New orders slowed and inventories were drawn down, with
deliveries also slipping. However, prices paid by manufacturers
eased last month.
 "Pressures from rising commodity costs, plus supply-chain
disruptions from Japan's natural disaster, and extreme weather
domestically have combined to slow manufacturing's momentum,"
said Nigel Gault, chief U.S. economist at IHS Global Insight in
Lexington, Massachusetts.
 "This is particularly worrying since manufacturing has been
the economy's shining star."
 Adding to the gloom, U.S. private payroll growth slowed
sharply in May, according to a private sector report, coming in
far below expectations and falling to the lowest level in eight
months. The report raised concerns about a broader reading of
U.S. payrolls figures due on Friday.  For a story:
[ID:nN01229306]
 In Europe, the Markit Eurozone Manufacturing PMI for May
slipped to 54.6 from 58.0 in April, the 20th month above the 50
mark that signifies growth but showing a sharp pull-back on
fresh signs of decline in the currency bloc's debt-laden
periphery.
 Spanish manufacturers contracted for the first time in
eight months, while Italian and Irish factories saw a marked
slowdown in growth. Supply-chain pressures dented the French
and German PMIs, which had been hovering near all-time highs.
 British manufacturing PMI hit a 20-month low in May of 52.1
from 54.6 in April, blamed on a weaker domestic market --
especially for consumer goods.
 Survey compiler Markit called the declines in peripheral
countries worrying, suggesting they could face growing
difficulty in cutting their enormous public deficits.
 "In the case of the euro zone, some of the volatility
you're seeing in government bond markets doesn't help, which is
clearly a threat to growth via potentially higher longer-term
interest rates," said Mark Miller, global macroeconomist at
Lloyds Bank Corporate Markets.
 Higher interest rates have already had a marked effect on
growth in emerging Asia, where investors are nervously watching
for any evidence that the slowdown there is worsening as
central bankers tighten credit conditions to combat inflation.
 That was most evident than in China, where the official PMI
touched a nine-month low, below economists' forecasts as new
orders fell sharply. A private survey hit its lowest mark in 10
months, held back by power shortages and a clampdown on
credit.
 SILVER LINING
 If there was a silver lining, it was that factory cost
inflation declined in most of the surveys -- both in Asia and
Europe -- which will ease pressure on central bankers to
ratchet up inflation-fighting measures.
 In the euro zone, there were clear signs that inflation
pressures had started to ease.
 "The brighter news was that recent falls in commodity
prices helped drive the greatest easing in input cost inflation
since November 2008," said Chris Williamson, Markit's chief
economist.
 "The combination of weaker inflationary pressures and the
steep easing in the pace of growth may encourage policymakers
to hold off on interest rate hikes until a clearer picture of
the health of the recovery appears."
 India was a key exception as price pressures showed no sign
of easing, leading economists to predict the central bank will
continue on its tightening course. India's PMI dipped to 57.5
in May from 58.0 in April.
 In China, where authorities have already taken measures to
curb inflation, economists drew a distinction between the
current slowdown suggested by the PMIs and the 2008 slump, when
the financial crisis decimated global trade.
 "It is important to point out that China is experiencing an
economic slowdown, not a collapse like in the aftermath of
Lehman's bankruptcy," said Dong Tao, a Credit Suisse
economist.
 HSBC's China PMI dipped to 51.6 in May from April's 51.8,
holding above the 50-point level which is the dividing line
between growth and contraction.
 Government data showed new export orders dipped to 51.1.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
 Euro zone PMI:                                  [EUR/PMIM]
 British PMI:                                     [GB/PMIM]
 China's official PMI:                      [ID:nL3E7H103M]
 China's HSBC PMI:                          [ID:nL3E7H103M]
 South Korea PMI:                           [ID:nS6E7EL00S]
 Taiwan PMI:                                [ID:nT8E7GJ00C]
 India's PMI:                               [ID:nBMA009868]
 Graphic on Asia's PMIs:     link.reuters.com/vez79r
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Yoo Choonsik in Seoul, Aileen Wang, Koh Gui Qing
and Zhou Xin in Beijing and Sumanta Dey in Bangalore; Writing
by Emily Kaiser, Andy Bruce and Lucia Mutikani; Editing by
Leslie Adler)


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